DYING BREED? Eight-unit, 4,096-Mw coal-fired Nanticoke plant is on the shutdown list. (Photo courtesy of Ontario Power Generation)

Faced with a capacity shortfall and fleets of dirty coal plants and aging nuclear units, Ontario is planning to rebuild and dramatically expand its electric infrastructure. The plan could soon make the province North America's most active market for powerplant construction and rehabilitation. Ontario's new Liberal government is moving quickly to break the regulatory gridlock that has paralyzed the power sector in Canada's most populous province since a botched attempt to implement retail competition in May 2002.

Ontario Energy Minister Dwight Duncan says he will unveil a detailed electric-industry restructuring plan later this spring aimed at increasing power supplies and encouraging conservation. Duncan says he expects up to $30 billion of public and private funds to be invested over the next few years in new generating sources, nuclear-plant rehabilitation and new high-voltage transmission lines. "We're looking at a massive investment of capital going forward....It could well be one of the largest peacetime investments in the history of this country," he says.

Details of the plan still need to be worked out but recent government reports suggest that key elements will include rehabilitating one or more of province-owned Ontario Power Generation's three mothballed units at its Pickering nuclear station. Also on the table are encouraging the development of new nuclear plants, probably through public-private partnerships, and spurring the development of new gas-fired and renewable generating capacity through long-term power-purchase agreements.

Ontario's Likely Plan

Spring solicitation for 2,500 Mw of conventional, 300     Mw of "green" power

Target 5% of total capacity to be green by 2007,     reaching 10% by 2010

Restart mothballed nuclear units; encourage     development of new nuclear plants

Build new transmission lines able to import at least     2,000 Mw

Dramatically improve efficiency through      demand-side management

Source: Government and other sources

The capacity-supply situation in Ontario is serious and, with Duncan's new government pledging to shut down 7,500 Mw of coal-fired plants by 2007, faces increasing challenges. According to Ontario's Independent Electricity Market Operator, the reserve margin is less than 10%, and on the hottest and coldest days–when demand rises past 25,000 Mw–the province imports up to 3,000 Mw from Quebec, New York and other neighbors to keep the lights on.

Only two plants totaling less than 700 Mw–barely enough to keep pace with load growth–are under construction in Ontario and scheduled to begin operation later this year.

The Liberal government in the past three months has taken several steps, beginning with a planned April 1 increase in retail rates for smaller customers to more accurately reflect wholesale prices, and to encourage conservation. It also announced plans to solicit 2,500 Mw of new generating capacity that could come on line quickly to replace some of the old coal plants that it plans to take off line by 2007. A parallel solicitation for 300 Mw of wind farms and other "green" capacity also is planned.

In a newly issued report by the Duncan-appointed OPG Review Committee, panel Chairman John Manley called for a full-court press, warning, "Ontario could be facing electricity shortages by 2007." Among many other things, the panel called for a $450-million rehabilitation at mothballed 515-Mw Pickering A nuclear Unit 1. But Manly says similar work on Units 2 and 3 should not proceed without "clear evidence of success" on the restart of Unit 1.

The committee also said the province "must begin planning now to supplement and ultimately replace its aging nuclear assets with new and better generations of nuclear technology." Atomic Energy of Canada Ltd., a Canadian-government entity that develops "Canada Deuterium Uranium," recently proposed building as many as eight 700-Mw CANDU nuclear units in Ontario.