POWER December 2016 - 60

GENERATION TRANSITIONS
Table 1. Ontario's 2015 installed
power generation supply mix. Source:
Independent Electricity System Operator
Resource
Nuclear
Natural gas and oil
Hydro
Solar, wind, and bioenergy
Coal
Demand response
Total
Capacity
(MW)
13,014
9,852
8,768
7,068
690
39,392
Percent
of mix
33.0
25.0
22.3
17.9
0.0
1.8
100.0
disastrous green energy program. "
Corcoran wrote that the aim of the provincial
government " is to keep consumers and the
public in the dark over the electricity mess that
exists after a decade of Liberal policy based
on the slogan 'Renewable is doable.' In the
rush to green, Ontario's electricity sector has
become an overbuilt collection of electricityproducing
assets selling power at high prices
into a declining market. Since 2006, annual
electricity demand within Ontario has dropped
6.5 percent, mostly a function of declining industrial
sectors. Meanwhile, installed capacity
soared by more than 25 percent, mostly a
function of the government's expensive wind
and solar schemes. "
OPG, the province's dominant electric
generator, is best known for the phase-out,
beginning more than a decade ago, of all
coal generation in Ontario, a political goal
favored by both of the dominant parties at the
time. April 2014 saw coal's finale with the
conversion of the small Thunder Bay plant
to fire on biomass (see sidebar " The Strange
Case of Thunder Bay " ). The province has
gone from 25% coal-fired generation to 0%
(see " Ontario Goes Coal-Free in a Decade "
in the May 2013 issue of POWER and online
at powermag.com).
OPG was able to kill coal over a decade,
according to Adams, because the province
has long had a large surplus of baseload
generating capacity. The death of coal had
no impact on reliability. After lopping off its
substantial coal generating assets, Ontario's
peak electricity demand in 2015 was about
24 GW, while the system's generating capacity
was in excess of 39 GW (Table 1).
The transition from coal led to a failed
move to gas, a costly program to upgrade
nuclear and hydro capacity, and the most recent,
interrupted move to more intermittent
renewables. That series of events led to soaring
electricity bills and a revolt among the
province's retail consumers.
The Huffington Post Canada reported this
summer that " Ontarians have seen two rate
hikes since December, adding around $100
60
to the average annual hydro bill. The problem
is especially acute in rural Ontario, where
high delivery charges mean some families
are paying in the range of $300 a month
for electricity. Manufacturers complain that
soaring electricity prices are forcing production
out of Ontario and giving Mexico and
other countries a competitive advantage. "
Ontario's politically driven electricity policy
began in earnest in 2003, with the advent
of the Liberal Party government of then-Premier
Dalton McGuinty. It has continued with
his successor, Kathleen Wynne. McGuinty's
edict to close the province's coal generation
was the crux of his plan to reduce Ontario's
greenhouse gas emissions; it was also a political
move to solidify his support in the province.
The left-wing New Democratic Party
(NDP) was pushing to shut down coal generation
by 2007. The Tories were offering a
2015 shutdown. Although McGuinty adopted
the 2007 date, the phase-out wasn't complete
until 2014, closer to the Tories' timetable.
The Gas Fiasco
Killing coal was relatively easy. Ontario's
electric generating system, with excess
capacity, particularly nuclear and hydro,
absorbed the lost coal capacity without reliability
impacts. However, it did drive retail
rates up by taking the least-cost generation
out of the dispatch queue.
In response to the end of coal, the McGuinty
government launched an aggressive
move to natural gas. That failed adventure
spelled the end of Dalton McGuinty's political
career, although not the end of his party's
control of the Ontario government.
Recognizing that closing coal capacity
could challenge reliability, the McGuinty
government began acquiring new natural
gas combined cycle generation. It awarded
a contract in 2005 for a 280-MW combined
cycle project in the city of Mississauga and
in 2009 for a 900-MW combined cycle plant
in Oakville.
Both proposals yielded intense local opposition.
Opponents rallied October 1, 2010,
at the Ontario Legislature, with the featured
speaker U.S. environmental activist Erin
Brockovich. In the 2011 provincial election,
all three Liberal candidates for Mississauga's
seats (Mississauga is the sixth-largest city in
Canada, with a population of about 713,000)
opposed the power plant and won election.
In Oakville, TransCanada Energy (TCE), the
project developer and a natural gas pipeline
company, was unable to get preconstruction
approval from the city government. On
October 7, 2010, the McGuinty government
cancelled the Oakville plant, stating that TCE
would be made " whole " and was entitled to
damages and the full worth of the contract.
www.powermag.com
On September 28, 2011, ahead of the general
election, the Liberal Party said that if it
won the election, it would cancel the Mississauga
project. Liberals won the most seats
on October 6, 2011, but fell one short of a
majority. That opened the way for the opposition
to use legislative committees to launch
examinations of the gas plants fiasco. The
next day the Energy Ministry announced that
the Mississauga project was dead.
McGuinty's staff was negotiating with
TCE over the Oakville cancellation throughout
this period, offering TCE a $462 million
settlement. TCE rejected the offer. A month
later, McGuinty upped the proposal to $712
million, but TCE still said no.
As negotiations were under way, a legislative
committee ordered the government to
turn over " all correspondence, in any form,
electronic or otherwise, that occurred between
September 1, 2010 and December 31, 2011 "
related to the cancellation of the Oakville and
Mississauga plants. In August 2012, then-Energy
Minister Chris Bentley announced a settlement
with TCE, insisting that the Oakville
cancellation would cost $40 million.
On October 15, 2012, McGuinty announced
he would step down as premier as
soon as the Liberals picked a new leader. He
also " prorogued " the legislature, a procedure
that put its activity on hold, effectively shutting
down the investigations of the gas deals.
McGuinty insisted that the cost of cancelling
Oakville would be $40 million and Mississauga
would cost $190 million, for a total of
$230 million. He specifically rejected an estimate
by Tom Adams that the cost would be
over $1 billion. A year later, Ontario's auditor
general found that the Oakville cancellation
would put the province on the hook for
$675 million and Mississauga for $275 million,
a total of $1.04 billion.
Ontario's Liberals elected Kathleen Wynne
as their leader in January 2013 and she became
premier in February. McGuinty resigned
his seat in the legislature in June and was
soon appointed as a senior fellow at Harvard's
Weatherhead Center for International Affairs.
As the McGuinty end game was playing
out in the fall of 2012, the Energy Ministry
turned over some 36,000 pages of documents
related to the gas plants to the legislature. Two
weeks later, another 20,000 pages turned up.
Later, after Wynne became premier, the legislature
went back into session and the committee
investigating the gas deal unearthed a
third batch of documents. Charges flew back
and forth about erased hard drives, withheld
documents originating from McGuinty's political
staff, and the usual claims that accompany
such highly political battles. Ultimately,
the investigations ended inconclusively, but
having done serious damage to the Liberals.
POWER | December 2016
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POWER December 2016

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