Ontario is rolling out the welcome mat for both conventional and renewable power developers from Western Canada to help avoid a looming electricity shortfall in the province.

A key part of the Dalton McGuinty government's strategy to restructure the electricity sector is to offer 20-year power supply contracts to spur power developers to build new electricity-generating plants in Ontario, says Shane Pospisil, assistant deputy minister in the Ontario Ministry of Energy's office of energy supply and conservation.

"When you look at electricity jurisdictions in North America right now, there are a lot of opportunities in Ontario," Pospisil told the Canadian Energy Research Institute's (CERI) 2004 Electricity Conference in Calgary last week. "We need to get some new capacity in place and there are some deadlines.”

The government remains committed to phasing out Ontario's five coal-fired power plants by the end of 2007 as part of "reforming" the electricity sector to make it more efficient and market-driven, Pospisil said.

John Keating

Ontario Energy Minister Dwight Duncan said earlier this month that it may be prudent to keep one or more of the coal-fired generators on reserve in case of an emergency electricity shortage.

But this step will be necessary only if Ontario can't find sufficient replacement power, Pospisil told Business Edge. "We obviously need to make sure before we replace the coal-fired plants that we have a backfill (power) capacity that's clean and ready to go.”

Coal-fired power now supplies about 7,500 megawatts (MW) or about 25 per cent of Ontario's electricity.

However, Pospisil cited a study by the Ontario Medical Association, which says that air pollution from coal-fired generators and other sources will be responsible for more than 2,000 premature deaths and 11,000 hospital admissions in Ontario this year, and will cost the province's economy more than $1 billion in health-related expenditures.

By 2020, Ontario will have to replace or refurbish a total of about 24,000 megawatts of power, at an estimated cost of $25-$40 billion, Pospisil said. "We have some very significant challenges going forward.”

Nuclear power plants, which don't emit air pollution, supply the bulk of Ontario's power - about 10,000 MW.

But all of these plants will be at the end of their operating lives between 2009-2018, and Pospisil noted they'll need major equipment overhauls to keep generating power safely and reliably.

Andrew Johnson, vice-president of power marketing for nuclear power generator Bruce Power, Ontario's largest independent electricity generator, says refurbishing the province's aging nuclear power reactors will require support - including long-term power supply contracts - from both the Ontario and federal governments. Calgary-based TransCanada Corp. has a 31.6-per-cent stake in Bruce Power.

Every 1,500 megawatts of nuclear power removed from Ontario's grid, to replace the plant's reactor core and steam supply system and then restart the reactor, costs between $2- $2.5 billion, Johnson told the CERI conference.

Pospisil said that despite the challenges, the McGuinty government is confident it can shut down Ontario's coal-fired power plants and still meet the manufacturing-intensive province's electricity demand.

Along with new and refurbished power sources, the government plans to implement energy conservation programs and install so-called "smart" electricity meters that allow customers to monitor and change their power-consumption habits.

Pospisil said the government is also committed to ensuring that five per cent, or 1,350 MW, of new power generation comes from renewable sources by 2007 and 10 per cent, or 2,700 MW, by 2010.

Last month, the government awarded long-term power supply contracts to 10 private-sector renewable energy projects to supply the Ontario grid with a total of 395 MW of "green" power - enough for more than 100,000 homes.

The province expects the projects, which include wind power, hydro and landfill gas, will lead to a $700-million investment in new generation capacity.

Canadian Hydro Developers Inc. in Calgary and Epcor Power Development Corp. in Edmonton each proposed a new wind-power project in Ontario, and each firm was awarded a 20-year supply contract from the government's Ontario Electricity Financial Corp.

Canadian Hydro's new wind farm will be its first in Ontario and the biggest wind-generating facility the company has ever built, says CEO John Keating.

The 67.5-megawatt project will be the first phase of the Melancthon Grey Wind Project that will eventually generate a total of 240 MW, he said. The first phase, to cost an estimated $120 million, will be built by 2006 in Melancthon Township near Shelburne in southern Ontario.

"This is a mega-project from our small-company-sized perspective," Keating said. Canadian Hydro's current wind power capacity consists of a total of 50 megawatts installed in several facilities in southern Alberta.

Canadian Hydro first moved into the Ontario market in 1997 with small, run-of-river hydro development and now has four hydro plants operating in the province. "We identified early on the opportunity and the need for new capacity in Ontario," Keating said.

Ontario, which has about 30,000 MW of total installed electricity capacity of all power types, is a much bigger, more manufacturing-intensive and therefore potentially more lucrative market than Alberta, which has approximately 12,000 MW of installed capacity, he noted.

The Ontario government has said it intends to issue a further request for proposals early next year for more renewable power, possibly as much as 1,000 MW.

Keating said Canadian Hydro will bid on that request and, depending on the requirements and terms, may go after all or part of the remaining 172.5 MW needed to complete its Melancthon wind-power project in southern Ontario.

Epcor Power Corp., a wholly owned subsidiary of Epcor Utilities Inc., plans to build its $80-million, 39.6-MW Kingsbridge Wind Power Project in the Township of Ashfield Colborne Wawanosh near Goderich, about 200 kilometres west of Toronto on the north shore of Lake Huron.

Ben Van Diepenbeek, a reeve for the township, says there is considerable support for the 22-turbine project in the local community.

The new wind farm "will offer both economic development for the local area and a new source of clean electricity for the entire province," he said.

Paul McMillan, senior vice-president of business development with Epcor, says the area has "one of the most favourable wind systems in Ontario," and is an ideal location for a productive wind farm.

It will be Epcor's first renewable energy generator in Ontario and by far the biggest wind-power project the company has undertaken. The City of Edmonton-owned utility and the Piikani Utility Corp. currently operate the 900-kilowatt Weather Dancer 1 turbine on the Piikani First Nation in southwest Alberta.

Epcor hopes to begin construction of the Ontario wind farm in early 2005, pending final regulatory approvals.

The Ontario government has also issued a separate request for proposals for 2,500 MW of new power from all sources.

"Certainly the Alberta firms have been very competitive, at least a couple of them, on the renewables request for proposals (RFP), and we're expecting the same thing on the 2,500-megawatt RFP," Pospisil said.

(Mark Lowey can be reached at mark@businessedge.ca)