Ontario's electricity future isn't this Quebec Diversion

Importing electricity from Quebec is in the mainstream media again.
There are reasons the option appears attractive. Quebec has an abundant supply of hydroelectric power, so there is the appearance of an opportunity.  Additionally, the demand profiles of Quebec and Ontario could be considered complimentary: Quebec has a winter peak, and Ontario has had, in recent years, a summer peak.

Quebec figures from HQ document (Dec. estimated)

The peaks aren't as complimentary as they sound. Ontario acually has a winter energy consumption peak too. The peak use of electricity is usually in the summer as the province heats mainly with natural gas in the winter. That is not the case in Quebec, where the winter energy peak is an electricity peak.

Ontario has only had local calls for conservation over the past couple of years (Toronto area), but Hydro Quebec called for conservation during winter demand peaks in both 2013 and 2014.

Ontario's first (and only public) Integrated Power System Plan (IPSP), released in 2007, noted an additional 1250MW of "Quebec Interconnection" as part of supply intended to meet the desired "Renewable Resources Goal." That interconnection has since entered service.  I have been tracking hourly intertie data back to April 2011; connecting that data with Ontario's top 25 winter, and summer, demand peaks shows that the flow of electricity between the provinces is exactly as logic dictates it should be.

It is tempting, in Ontario, to think of this as a closed system, but it is not - and Quebec's public electricity entity is not thinking of it that way. Hydro Quebec notes they can, "use this [2,545MW] interconnection capacity with Ontario to increase the volume of exports to New York State and the U.S. Midwest." [1]
It's probable that much of the Ontario electricity moving to Quebec is also being wheeled through to American destinations.

Quebec has only a few relatively minor firm supply contracts [2]. Their large reservoirs should make them richer acting as active traders of electricity; purchasing when market prices are cheap (ie. shoulder seasons - windy hours), and using their reservoirs to generate power for export in more expensive periods.

The recent push for the idea that Quebec imports could be a replacement for firm capacity comes from the Ontario Clean Air Alliance (OCAA). The OCAA claims the transmission capacity already exists between the two provinces to "carry enough power to replace almost all the power produced by the Darlington Nuclear Station," and "By bringing in renewable water power from Quebec instead of rebuilding our aging nuclear reactors, Ontario can save more than $1 billion a year on its electricity costs." I'll review each of these specific statements.

Transmission

Ontario and Quebec already have, as previously demonstrated, a well-utilized transmission intertie system. The 2545MW of capacity is well utilized at peak periods; if it were used for baseload it would not be available for incremental supply at peak periods.

screen capture from ieso.ca

Inside of Ontario's borders, the transmission capacity from the major load (Toronto) to the border has some significant non-nuclear generation already, including the 1,045MW RH Saunders hydroelectric plant on the St. Lawrence, the 156 MW Cardinal cogeneration plant, the 198MW Wolfe Island wind operation, and the 2100MW Lennox Generating Station.

The OCAA can claim existing transmission could accommodate an output equivalent to Darlington's 3500MW is that it already does accommodate far more than Darlington's capacity from non-nuclear suppliers - as well as existing imports from Quebec.

Lennox is relevant in a couple of ways: it has acted as an "emergency reserve" in the province, and the site is to be the home of a 900MW capacity gas-fired power plant following an agreement to relocate the plant from "the load" (Toronto's western suburb of Oakville). The Auditor General of Ontario reported on the cost of the agreement to relocate the Oakville plant, anticipating $81 million in transmission systems upgrade costs, which may be a very low estimate as the report seemed dismissive of the opinion of the organization designed to be the province's planning experts:

The OPA’s position is that Napanee is not an optimal location for a power plant. Specifically, its planning flexibility will be reduced because the power that the Napanee plant will produce will use up transmission capacity in the eastern hydro corridor that the OPA would rather be kept free for other sources of electricity, such as imports, nuclear power and power from the existing Lennox Generating Station.

$1 billion a year

As with the OCAA's transmission statement being correct but the conclusion being wrong, so too is their assumption that because Quebec is adding capacity, the export capacity will increase, and that increased capacity could be contracted at rates collected by market exports in 2012.

The claim that a long-term purchase agreement could be signed at the average cost of power exported during the least lucrative export period in a decade is simply silly; the same logic would have New York state thinking they could sign a long-term contract with Ontario at under $40/MWh.

Business acumen aside, a government is unlikely to procure new supply at above 8 cents per kilowatt-hour while signing contracts to export it at a half the amount. Considering the average cost of new supply in Quebec, since 2008, has been tagged at between 6¢/kWh and 12¢/kWh [3], the OCAA suggestion that expensive new supply in Quebec be contracted at low prices by Ontario is exactly like suggesting New York could sign long-term procurement deals with Ontario precisely because Ontario was refurbishing nuclear plants.

While there is little reason to take the OCAA's estimates seriously, it is important to note the scale of the discussion. This is roughly $55 billion [4] they suggest not be spend within Ontario - on some of the most efficient nuclear reactors in the world - but instead sent beyond Ontairo's borders.

Almost 2 years ago I quoted a Ministry of Energy official explaining that Quebec would not export to Ontario at the same prices it charges industrial customers in Quebec. That remains obviously true, and the OCAA's latest claims remain as obviously false as their previous claims.


Conclusions

There are very complex issues involved in the electricity system and the tasks it needs to perform.

The proposal to shut Darlington and contract replacement power from Quebec is a poor one as Quebec cannot help with meeting winter capacity requirements, and pricing is uncertain.

I have demonstrated that Ontario's electricity supply outlook is the worst in North America, making it a strange time to look at ditching a large component of our supply, one that is projected to remain, for decades, at a cost below the average rate currently being paid in Ontario.

Quebec's outlook, in terms of its ability to meet standard reserve requirement for 2023, isn't hugely better than Ontario's, and in the immediate future Quebec's ability to meet peak demand is uncertain to the point that it is Quebec, not Ontario, that has put out a call for capacity from external markets.




Endnotes

1. In 17 of the 25 top summer peak hours Ontario was a net exporter of electricity, meaning that the net imports from Quebec were likely being entirely wheeled through to jurisdictions beyond Ontario.
2: HQ announcement of a contract with Vermont (225MW); another contract exists with Cornwall (145MW peak) - see this comment from Claude Boucher following "Ontario's Electricity Exports Surge..."
3. In a report commissioned by the government of Quebec; Rapport de la Commission sur les enjeux énergétiques du Québec. MAÎTRISER NOTRE AVENIR ÉNERGÉTIQUE, which I briefly summarized in
Quebec report calls for stop on electricity projects, carbon trade ....
4. Darlington average annual output has been ~27.5TWh. Assuming a refurbished life of 25 years and a price of $80/MWh leads to the $55 billion figure.