Ontario, the coal-free province

In the first of a two-part series, Megan Darby reports from Ontario, which has determined to close all its coal-fired power stations by 2014 despite having some very energy-intensive industries.

The 35th floor of a Toronto skyscraper is not a bad place to start if you’re trying to impress foreign journalists. The view from the boardroom stretches from condos and leafy suburbs of Canada’s largest city to trees and lakes beyond. Near the harbour, a single wind turbine turns.
Half a dozen reporters from the UK and the US are here because the Ontario government is keen to show off its ambitious green energy plans. The province has become the first jurisdiction in North America to commit to phasing out coal from its generation mix. It is on track to burn its last lump of the black stuff next year. “We are quite proud of the fact that replacing coal is the largest climate change initiative in the whole of North America,” says John Whytock, director of communications at Ontario Ministry of Energy.
It is not a trivial boast. At its peak, the province had 10GW of coal capacity, accounting for a quarter of electricity generation. Replacing it with lower carbon energy sources is expected to slash the sector’s carbon emissions by 75-80 per cent. It is the equivalent of taking 7 million cars off the road.
Ditching coal leaves a big gap to fill. Not only did coal provide a hefty chunk of capacity, it was also the principal source of flexibility on the system. Nuclear and hydro continue to provide three-quarters of the power, but have limited ability to respond to variation in demand. Intermittent wind and solar power add to the challenge of balancing supply and demand.
Ontario energy minister Bob Chiarelli says: “When we came to government in 2003, Ontario’s electricity grid was in need of investment. We were a net importer of power and had increasing capacity requirements.
“Ontario was once heavily dependent on coal and home to the single largest point source emitter of greenhouse gas in Canada (Nanticoke Power Station). We made it a priority to modernise the electricity system and produce clean, reliable, generation.”
As anyone working in energy knows, exchanging established power plants for emerging green technologies does not come cheap. Ontario is home to energy-intensive industries including mining, forestry and steel production. In deciding to take a lead on green energy, the Ontarian government risked putting up prices for consumers and driving industry away to less ambitious neighbours.
Canada as a whole has a mixed record on fighting climate change. A Liberal government signed the Kyoto agreement in 1997 but its Conservative successors pulled out in 2011, amid fears the country would not meet its carbon reduction target. Energy policy is a provincial matter and while Ontario is promoting green energy, Alberta is engaged in the controversial practice of extracting oil from tar sands. There is no levy on carbon emissions.
In the absence of external pressure, why go ahead with such a politically risky strategy? Chiarelli says: “The decision to phase out coal was made to ensure a cleaner, healthier Ontario for current and future generations.” His ministry estimates that the province will avoid costs of C$4.4 billion (£2.7 billion) from the health and environmental impacts of burning coal. Toronto and other populated areas are regularly hit by smog. While a unilateral crackdown on coal does not stop smoke blowing in from the 131 coal plants in Illinois, Indiana, Michigan and Ohio, the early signs are that it is helping.
Officials also cite the economic opportunities of developing the low-carbon technology other parts of the world will inevitably  need sooner or later.
While the unit cost of power might increase, “we are doing everything we can to get overall consumption down so the bill does not go up”, says policy director Tom Chapman. “Renewables add cost, smart grids add cost, but we will end up with a much more efficient system.”
From 2005 to 2011, demand fell by 1.9GW across the province. Much of that may be down to the economic downturn, but conservation also played a part. Ontario is way ahead of the UK when it comes to smart meters, having rolled them out to every household by 2010 (see box). There was no need to debate – as in the UK – whether it should be retailers or distribution network operators installing the technology, because those functions are both covered by “local distribution companies”, of which there are about 90. There is also a grants programme for industrial projects that can demonstrate big energy savings.
Carrying out the strategy is simplified by the fact that most of the market is under central command. Around 70 per cent of power comes from provincially owned Ontario Power Generation. The rest is provided by small players and one private nuclear operator.
Ontario came late to deregulation, opening up the sector to competition in 2002. After a backlash from consumers newly exposed to price volatility, a body was set up to reassert strategic oversight. The Ontario Power Authority (OPA) has a remit to promote energy saving, plan for the long term and make sure there is a “reliable, cost-effective and sustainable” power supply. It administers feed-in tariffs for small-scale renewable generation and has recently moved to a competitive procurement process for large-scale renewables.
Critics say this heavily managed market delivers poor value for money. A study by London Economics International published this month was scathing. It reads: “The Ontario power sector today is characterised by oversupply, a mismatch of generator capabilities and needs, rising prices to final consumers, a lack of transparency in price formation, and volatile and contradictory policies. Consequently, private sector actors are unable to justify investment without some form of government-backed contract. While various governments have announced laudable goals, failure to rely on either sound planning or market principles has meant that generation capacity has not been procured at a long-run least cost.”
On the upside, the report says “common-sense solutions exist” to cut power costs in the long term without compromising policy goals.
The government of Ontario is on the brink of achieving its goal of eliminating coal power. That is a distant prospect for most developed economies, while developing nations such as China are going the opposite way. The next challenge is to get a handle on the cost.

Vital statistics

The largest province of Canada’s ten provinces, Ontario has a GDP the size of Switzerland. It accounts for 40 per cent of the country’s economy and population. It is a net exporter of power to neighbouring provinces and the US, delivering 9.9TWh in 2012.
Nuclear will continue to make up the lion’s share of the mix. Most of the 13GW fleet will need substantial refurbishment in the next decade. In 2010, the government was planning to build another 2GW, but lower than expected demand growth has prompted a rethink.
Hydro also provides a reliable chunk of generation. The OPA is contracting to bring on another gigawatt by 2018.
Gas has ramped up, particularly in the past half-decade, to 10GW of capacity.
Wind has already outstripped coal in terms of power generated. Another 5GW of renewable power capacity, mostly wind,
is expected to come online in the next
18 months.