Building a Case For Investment, is a report prepared by the Conference Board of Canada. The report, (which I'll refer to as simply The Case) contains some some questionable assumptions, but a lot of research was put into the document, and it's worth the second look for some relevance. The written text is far less meaningful than the subtext included with the figures for generation. That subtext shows the Conference Board picking Canada's traditional sources as winners (large hydro and natural gas), and throttling the wind monster.
The second sentence of the preface contains the first false premise I spotted; “With half of the generation assets built before 1980, the industry faces a pressing need to accelerate investment in infrastructure at all levels.” This immediately struck me as false because 60% of Canada's electricity generation is from hydro – which lasts a long time. The Case later lists estimated useful economic years as; 40 for coal generation, 50 for hydro, 25 for nuclear, and 25 for natural gas/biomass. These are far too low. Figures from the U.S. Energy Infromation Administration (EIA), for 2008, show the average life of existing coal generation plants was 43, biomass 33, hydro 60 and nuclear 30. The average plant operating in the US is, in many categories, older than the Conference Board of Canada assumes Canada's plants will last.i EIA data further indicates that the overall capacity factor for all generation dropped to 44.9% from 54.6% only 10 years earlier. Coupled with the low natural gas price, which is lowering the market pricing of all generation (as natural gas is primarily the fuel used for meeting incremental demand – or peaking), there is increasingly less appetite for any new generation.
While The Case notes a declining investment at times over the past number of decades, it doesn't note the corresonding lack of increased demand during those same time. The investments of the early 90s lead to a dearth of investment in the late 90's precisely because of the recession in the early 90's. The actual needs analysis, or demand forecast, is stated to have been, “identified using the National Energy Board long-term outlook and the net trade capacity calculated for each province.” I'm going to assume that refers to the NEB's “Canada's Energy Future – Reference Case & Scenarios to 2030 – Energy Market Assessment”, which is from 2007. 2008 and 2009 were the first back-to-back years of declining demand for electricity in the United States of America since the 1930's. I have reviewed electricity demand projections for Ontario, and the United States, elsewhere on this blog (particularly in commenting on Ontario's Long Term Electricity Plan). These are not only more current, there also isn't demand growth of any significance expected in either jurisdiction. The most recent U.S. Energy Information Administration (EIA) long-term outlook has a 150% decrease in electricity imports by 2035. Those American imports are the Canadian exports, which The Case notes as 7-9% of total Canadian generation. Readers of this blog will know I have argued that Ontario does not so much export as it dumps excess, for whatever it can get. I believe Manitoba's exports have been at very low rates as well. The Case assumes exporting is desirable, and export markets will be available. Neither assumption need be valid. That said, I didn’t see any actual demand projections in The Case.
The Case does conclude that new “capacity additions, projected at 39.4 gigawatts (GW), are estimated to require $116.4 billion of investment (60 per cent of total generation investments). That is almost certainly nonsense. This would essentially add more supply than Ontario has while Ontario itself is unlikely to grow demand, nor is Quebec, and I think it is unlikely the Maritime provinces or Manitoba will see large demand growth either. The chance of needing “new” capacity isn't great.
I had assumed the Conference Board was aware of this, and was making the case to replace each watt of coal, or older generation, with 2 watts – 1 of wind to show, and another of natural gas to actually meet demand. This is the scam that is to drive investment, and the Conference Board reads like it is creating the need/demand, and pricing the green option, coupled with an actual useful option, to fulfill it.
But it doesn't quite carry the scam off – it's hard to put so much work into researching the issue and not recongnize the obvious at some point. The recognition is disguised in Chapter 4 of the report. A review of Table 4, the researched “Generation Capacity Under Construction or at Advanced Planning Stage”, Table 5, the research “Generation Capacity Proposed,” and Table 6, the “Generation Capacity Included in Investments”, shows which projects the Case believes should proceed, which should not – and it actually shows additional capacity in some provinces that aren't yet planned or proposed!
Adding the proposed, from table 5, to the planned of under construction from table 4, yields 51213MW . The Case is based on the 39386MW. Of the 11827MW of projects the Case dismissed, 13013MW were wind. There is an obvious conclusion that The Conference Board of Canada clearly made, correctly, but has excluded from the written text of the Case. In the province I am most concerned with, the Case lops off 6043MW of wind, 501MW of solar, 42MW of biomass, 41MW of landfill or biogas, and 52MW of large hydro. The Case then adds in 2000MW of nuclear (presumably the new build for Darlington – which should have been included in the proposed generation figure), 13MW of small hydro, and 1400MW of natural gas. This is a rejection of Ontario's Long Term Electricity Plan, with the sole exception of it's nuclear aspect.
There's another disconnect in the Case. The summary notes “Replacing aging generation, transmission, and distribution assets at the same time as integrating more distributed generation and renewable energy creates opportunities at all levels of the electric power system. The key challenge is to manage the costs to consumers.” Fair enough, but chapter 3 indicates there is no desire to invest productively, or to consider matching supply and demand. The Case notes in the 60's and 70's investment averaged 6% annual growth, and by the 90's and 00's, it was only .5%. In not unrelated statistics from Ontario, shown in the first post to this blog, in the 60's and 70's annualized Ontario growth was 5.7% and since 1990 it's nil. Chapter 3 has another argument in the 'service lives of new capital” rapidly decling. From 43 in 1985 to 21.3 in 2010. I really don't want to know what they are talking about, but it sounds like we should spend twice as much because we are half as productive. This should be a disconnet in terms of meeting the challenge given regarding costs.
Let's reread that last sentence from the summary:
“The key challenge is to manage the costs to consumers”
That could mean let's make sure we get every cent possible out of consumers.
The Conference Board of Canada's “Canada's Electricity Infrastructure: Building a Case for Investment” is an ambitious research project, but it's aversion to discussing value for the end customer, and failure to link supply and demand, either historically or in projections for the future, make it, like IWT output, a sudden burst of little, or no, value.
