As Ontario approaches the one-year anniversary of a significant blackout that hit the province and large swaths of the United States and eastern Canada on Aug. 14, 2003, the province appears less at risk now for experiencing a similar type of outage, said David McFadden, who represents Canada in the electric system working group for the Canada-U.S. joint task force that has been examining last year’s historic blackout.

“We think the industry has learned a lot from what happened in August 2003,” McFadden said in a wide-ranging interview with NGI. “Not only the regulators and the governments, but also the transmission companies and all the other market participants, and we’re optimistic that lesson has been learned and we’re probably less likely now to have a blackout than we might have been before.” McFadden said he thinks “people are more alerted to the kinds of issues which caused the blackout and caused this blackout to spread as broadly as it did.”

That doesn’t mean that “everybody is completely compliant” with all of the reliability standards, “but I think people are now alerted to it and we were sensitized to it and, as a consequence, I think we are less likely to have this kind of blackout,” McFadden added.

At the same time, he underscored the fact that “there’s no preventing any future blackouts from happening anywhere. There’s always going to be lightning strikes. There will be hurricanes [that will] blow through. There will be natural disasters that will happen and there’s nothing you can do about it. What you can do about those things, though, is limit their impact and hopefully that’s what is going to come out of this — is where there are blackouts, they won’t spread like wildfire” as the blackout in August 2003 did.

The U.S.-Canada joint task force earlier this month issued a final report reviewing the causes of the blackout and also including more than 40 recommendations aimed at preventing a repeat of another large-scale outage as experienced on both sides of the border last year (see NGI, April 12).

One key issue looming for reliability in Ontario is the provincial government’s stated wish to shut down 7,500 MW of coal-fired generation by the end of 2007. The Ontario Independent Electricity Market Operator (IMO) recently said that a substantial amount of new supply, refurbished generation and demand-side resources are likely to be needed by 2014 in the province in light of the government’s plans.

“My feeling right now is that the government has not changed its position that it wants coal to be eliminated as a generating fuel by the end of 2007,” McFadden said. But “a lot of people in the industry don’t feel that is at all realistic or practical. We’re going to have to see in the next few months, whether in fact through a combination of conservation measures and securing new generation, that this goal is achievable. I don’t believe that the Ontario government would put the province in a position where we were closing plants and having rolling blackouts as a consequence of its policy. I cannot believe the government would ever do that.”

In a speech outlining plans for the future of Ontario’s electricity grid delivered last Thursday, Energy Minister Dwight Duncan said that the province remains committed to replacing coal-fired electricity generation in the province. “In so doing, we will never put Ontario consumers in jeopardy, and will be totally satisfied that adequate alternatives are in place before we replace coal,” Duncan said.

What the Ontario government is probably trying to do is “push as hard as it can to get coal eliminated,” McFadden noted. “They are hoping that it will happen in that timeframe, but it’s a very aggressive timeframe.” He noted that the IMO has suggested that the province probably needs 2,000 MW to 3,000 MW of additional generation for reliability reasons “over and above what would be required to compensate for the removal of coal from production. So this is a very tall order in a very short period of time.”

McFadden said that “there are many factors that people are asking the government to consider. Is it possible to build that much production or achieve that much energy efficiency in that very short period of time. Even if you could, what is going to be the price of the power at the end of it?…What is going to be the impact on reliability and availability of supply? So there’s a lot of issues that we’re coming to grips with.”

McFadden said that one of the major issues facing the province relates to the role of nuclear power. The province has indicated that it is “going to go ahead with probably an expanded nuclear program in the years to come. But the thing is, you’re not going to build brand new nuclear generation by 2007. It’s more likely to be seven, eight, maybe as much as 10 years away, so that does not answer the coal question. In the long run, it might, but in the short run, it doesn’t.”

The IMO recently said that one of the more immediate reliability-related issues facing the province is in the greater Toronto area (GTA), which is bracing for the April 30, 2005 shutdown of the Lakeview thermal generating station. Plans are being implemented to address this in the short term, IMO noted, while in the longer term, additional generation is also required in the Toronto area to replace the Lakeview generating capacity and to meet load growth in the GTA.

McFadden said that Hydro One is making a “pretty significant investment” to improve transmission into Toronto to try to deal with that issue. “The hope is that new transmission upgrade may be available by then,” he noted. “In addition to that, there is talk of new generation being installed around the GTA. The question is whether it will be available by April 2005. It’s hard to believe it would, so that…could potentially be an issue, but I know Hydro One is moving ahead with a project to at least provide all, or at least a good part, of the answer through transmission.”

In the medium to long run, McFadden believes “we’ve got to build more generation into the GTA because we’ve got serious congestion around Toronto and with the elimination of Lakeview, that leaves a hole of approximately 1,200 MW.”

Meanwhile, the provincial government has indicated that it will soon be issuing a request for proposals (RFP) for up to 2,500 MW of new electrical generation capacity and/or demand-side management initiatives to be developed as early as 2005. Ontario also plans to issue another RFP for up to 300 MW of renewable energy capacity to be in service as soon as possible.

McFadden was asked to comment on what he thinks the response from marketers will be to the RFPs. “Undoubtedly, this is going to be one of the best markets to invest given the demand,” he said. While a number of markets in the Northeast are facing a surplus situation, “we’re heading into a situation where we’re going to be really constrained here, so this will be a good market for new generation, so this will encourage companies.”

McFadden said that “there are quite a number of companies coming up here and looking around. I know of two or three various significant generators who are seriously looking at siting a new plant here, so there is interest. The question they’ve all got is — what’s the shape of the electricity market going to be in Ontario?”

In his speech, Duncan noted that the province intends to propose sweeping reforms in the province’s electricity sector through legislation that will be introduced in June. Among other things, the plan calls for the creation of a new Ontario Power Authority that would ensure an adequate, long-term supply of electricity in the province.

McFadden said that the Ontario government has to be “mindful that if the legislation doesn’t encourage investment — if it has things in it which would discourage generators from investing, then they’ll never meet their production goals. So the government’s going to have to be very mindful of what investors are going to be looking for — whether it’s generators or whether it’s financial institutions who are going to finance generators — they’re going to have to be mindful of what they’re going to need.”

Looking at the overall transmission picture in the province, McFadden said that Ontario’s grid is in “pretty good shape,” while noting that there “are things that need upgrading.” He noted that Hydro One has proposed to invest upwards of C$4 billion in transmission upgrades in the province.

McFadden serves as chair of the National Energy and Infrastructure Industry Group at Gowling Lafleur Henderson LLP, one of Canada’s largest national law firms. He also serves as chairman of the Stakeholders’ Alliance for Electricity Competition and Consumer Choice, which is a broad-based coalition promoting the reform of the Ontario electricity system.

In June 2003, McFadden was appointed to Ontario’s Electricity Conservation and Supply Task Force. From 1996 to 1999 he served as chair of the Toronto Board of Trade’s Task Force on the Electricity Industry.

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