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Ontario Study Sees Most Benefit From Natural Gas, Nuclear Power

A combination of nuclear and natural gas-fired power came up the winner of a recent cost/benefit analysis of four scenarios to provide power to the province of Ontario. The nuclear/gas option won out over the status quo coal-fired; all natural gas-fired; or coal-fired with stringent emissions reductions. The analysis included the costs of premature deaths and environmental damage as well as the usual costs associated with plant operations.

The study, prepared by DSS Management Consultants Inc. and RWDI Air Inc. for the Ontario Ministry of Energy, followed the ministry's request to examine the four scenarios in the wake of the province's decision to work toward shutting down old coal plants, its primary power generation source.

The cost/benefit analysis (CBA) found the total present value of continuing with its coal-fired plants from 2007-2026 would be (all in C2004 dollars) $49 billion or an annualized cost of $4.4 billion, of which 77% of the costs were in health and losses due to environmental damage.

Continuing with coal-fired plants, but with stringent emission controls added would cost $32 billion over the same time period ($2.8 billion/year) with 51% of the costs in health and environmental damage. The all-natural gas option was estimated to cost $29 billion over the 19 years ($2.6 billion/year) with 20% of the cost representing deaths and environmental damage.

The recommended nuclear and natural gas combination would cost $22 billion from 2007-2026 ($1.9 billion/year) with 21% of the costs representing health and environment. The report noted, however, that health and environmental damages associated with nuclear power generation have yet to be calculated.

The natural gas-only scenario had the highest operating costs -- $23.5 billion over the 19 years, including fuel costs of $16 billion, capital costs of $5.3 billion and fixed and variable operating costs of $2.2 billion. The preferred nuclear/gas option showed capital costs of $7 billion, fuel costs of $5.9 billion and fixed and variable operating costs of $4.3 billion for a total of $17.3 billion. Using modified coal power, the capital cost would be $5 billion, with $6 billion for coal and $4.5 billion in fixed and variable operating costs for a total of $15.5 billion.

The estimated natural gas cost used in the calculations was the medium case with a C$6.50/MMBtu delivered price for a 65% load factor and a C$6.00/MMBtu price for a 90% load factor (prices are expressed as 2004 Canadian dollars). The annual price increase is estimated at 0.7%.

The study included both the short- and long-term risks of premature deaths from air pollution in calculating the health costs. For the long-term risks it used the "cohort-based methodology which has been used for estimating health risks associated with exposure to air pollution by the U.S. Environmental Protection Agency and other organizations..."

The consulting firm, in naming the nuclear/natural gas option as "the most likely to yield the greatest net benefit," noted they had been given only the four options, when in fact, the Ontario government has initiated conservation and renewable energy programs. It recommended that follow-on studies examine:

The Ontario government is actively pursuing a diverse range of generation technologies including refurbishing nuclear plants, expanding renewable generation capacity and seeking contracts to import hydroelectric generation from other provinces, the study said. The current Clean Energy Sources Request for Proposals could result in 2,500 MW of natural gas-fired generation.

On the nuclear side, there is 3,000 MW of idle nuclear capacity in Ontario. The Pickering A Unit 1 (500 MW) is currently being refurbished and is projected to be in-service by September / October 2005. A decision on refurbishing the remaining two units (500 MW each) will be made shortly. The Government has appointed a special negotiator to arrive at an agreement with Bruce Power to refurbish the two idle units at the Bruce nuclear station (770 MW each). In addition, the government has established an electricity conservation target of 1,350 MW by 2007 and a renewable energy generation target of 1,350 MW by 2010.

The study published April 27 is available at http://www.energy.gov.on.ca/english/pdf/electricity/coal_cost_benefit_analysis_april2005.pdf

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