Report to: General Committee Report Date: April 30, 2007

SUBJECT: General Comments on the Closing of the Nanticoke Coal-Fired Power Plant

PREPARED BY: Viive Sawler, Manager, Markham Energy Conservation

Office – x 7523

RECOMMENDATION:

THAT the Report entitled, “General Comments on the Closing of the Nanticoke Coal-Fired Power Plant” be received for information.

THAT the Corporation of the Town of Markham continue to support the Province’s efforts to explore coal replacement options that achieve environmental accountability, preservation of economic sustainability and that provide a reliable and secure electricity system to all Ontarians.

EXECUTIVE SUMMARY:

Not applicable

FINANCIAL CONSIDERATIONS:

Not applicable

1. Purpose 2. Background 3. Discussion 4. Financial

5. Others (Environmental, Accessibility, Engage 21st, Affected Units) 6. Attachment(s)

PURPOSE:

The purpose of this Report is to provide some “General Comments” on the Nanticoke Coal-Fired Power Plant in response to the deputation brought forward to General Committee on March 5, 2007, by Mr. J. Gibbons, Chair, Ontario Clean Air Alliance.

BACKGROUND:

On June 13, 2006, Premier McGuinty announced that the 2009 phase-out plan for Ontario’s four remaining coal burning plants, including the one at Nanticoke would not be met, and thereby directed the Ontario Power Authority (OPA) to evaluate options and propose a new schedule for the phase out of coal. The OPA’s proposed coal replacement plan is comprised of the following components:

· Retain the existing coal-fired generation capacity in-service to 2010 concurrent with the ability to produce 20-25 TWh of electricity per year. This can be accelerated under certain favourable conditions.

· Gradually reduce the coal-fired capacity starting in 2011 to about half of the current installed capacity and plan to operate this reduced capacity to the end of 2014.

· Improve the environmental performance of the operating coal-fired generation facilities to the extent practical during the transition period to 2014, in accordance with the recommended capacity requirements and consistent with meeting applicable and evolving regulatory requirements.

· Retain plan flexibility and adjust the plan as necessary, based on regular review of risk profiles and new and pertinent information that becomes available.

· Consider the options for potential future use of the coal-fired generation sites.

OPTIONS/ DISCUSSION:

The production and planning of Ontario’s power supply is a complex procedure with many variables to be simultaneously considered - security, reliability, the environment and the economy. There are many competing interests represented, all seeking to put forward a preferred option that requires careful consideration by those undertaking the analysis and development of a coal replacement plan.

On March 5^th, Mr. Gibbons presented the Ontario Clean Air Alliance’s (OCAA) view that the Province needs to pass a legally binding regulation to ensure Ontario Power Generation (OPG) phase-out coal burning at Nanticoke by 2009. In addition, Mr. Gibbons indicated that the OCAA supports a plan to convert Nanticoke’s coal fired boilers to natural gas.

Following Mr. Gibbon’s deputation, information from differing perspectives was received by MECO Staff from interested stakeholders including; Grant Church, a resident of Cayuga, a community down wind from Nanticoke, the Clean Affordable Energy Alliance, Ontario Power Generation, and the Power Workers’ Union. Selected documentation from these stakeholders is attached to this Report and illustrates the complexity of the issue and the challenge in selecting a preferred option. The OPA has undertaken significant research and analysis on this issue and therefore, their position related to developing a coal replacement plan and the alternatives to the use of coal that were explored as documented in Discussion Paper #7: Integrating the Elements – A Preliminary Plan, November 15, 2006, are highlighted below.

Conversion of coal-fired boilers to natural gas

While the OCAA recommends this option, the OPA does not, due to lead time, cost and inefficiency. Conversion to natural gas would involve the cost of burner tip replacement, the cost of new or expanded gas pipeline capacity, and the cost of natural gas for a total estimated conversion cost ranging from $540 million to about $750 million. In addition, the estimated time required to complete this conversion is five years and the fuel cost and low efficiency at Nanticoke will result in operating costs for generating electricity at close to $100 per MWh.

Building new combined cycle gas turbines

While this option represents a higher efficiency solution than conversion of existing boilers, it is not recommended by the OPA either considering the OPA’s Preliminary Plan already includes a substantial amount of gas-fired generation which is a challenge to implement. Much more new gas will result in the use of gas for baseload and intermediate load applications, and that is not consistent with public policy as reflected in the Minister’s directive. In addition, long lead-time requirements are also required when building.

Electricity imports

The OPA has stated that opportunities to import clean energy should continue to be explored. Firm capacity imports could potentially enable coal replacement to proceed more quickly. When and if such arrangements are put in place, the coal replacement plan will be reviewed to assess the opportunities for advancement of coal replacement.

Emission reduction technology

The OPA has noted that emissions during the period 1985 – 2005 have generally declined and this trend would continue if the minimum coal burn is achieved. However, if insurance coal continues to be required in 2010, there is a potential for increased emissions of mercury and NOx. The OPA has stated that emission control technology improvements to mitigate the environmental impacts of burning coal should be considered. While work is still in progress to assess the environmental impact of various emission control technology options some recommendations include:

· Installation of Selective Catalytic Reduction facilities on Nanticoke units 5 and 6

· Installation of baghouses

· Installation of scrubbers on some or all of Nanticoke units 5 – 8

· Maximizing the use of biomass feedstock for co-firing of boilers

In summary, the OPA seeks to maximize options that can replace coal, address uncertainties and ensure that system reliability can be maintained while determining the earliest practical phase-out of coal. The OPA intends to review the IPSP regularly and as new and cleaner technologies become available it may be possible to move to cleaner energy sources sooner than anticipated without risking generating capacity and system reliability. In the meantime, the Town of Markham continues to support conservation demand management efforts, and cleaner, renewable energy sources, including distributed generation and district energy technologies.

RECOMMENDED

BY: ________________________ ________________________

Viive Sawler, Manager Jim Sales, Commissioner,

Markham Energy Conservation Community & Fire Services

Office Commission

ATTACHMENTS:

· Ontario’s Integrated Power System Plan, Discussion Paper 7: Integrating the Elements – A Preliminary Plan, pp. 43 – 51, Ontario Power Authority, November 15, 2006.

· “Nanticoke – Canada’s No. 1 air polluter to keep pumping out pollutants,” Ontario Clean Air Alliance.

· E-mail to V. Sawler re – Nanticoke Generating Station from Grant Church, March 13, 2007.

· Letter to V. Sawler, Re – Nanticoke Coal-Fired Power Plan Resolution Proposed by the Ontario Clean Air Alliance, Clean Affordable Energy Alliance, March 13, 2007.

· Backgrounder, “Ontario Power Generation – Emissions in Perspective,” OPG, March 27, 2007 & OPG Presentation on Nanticoke Generating Station, March 29, 2007.

· Letter to S. Birrell re – Converting Nanticoke Generating Station (GS) to Burn Natural Gas, Power Workers’ Union, April 3, 2007.