Finding Facts in the Fog of Fiction

By John Stewart
Director of Policy and Research
Canadian Nuclear Association

Have you seen the email that says, “The nuclear industry doesn’t want you to think about Quebec”? Well, we actually do want you to think about Quebec, because the argument that Ontario could import cheap electricity from Quebec and scrap the refurbishment of the Darlington generating station just doesn’t work.

Commission report on Quebec's energy futureQuebec’s commission on energy policy turned in a report in February 2014 on its public consultations – the same report used as the foundation of the import-from-Quebec argument.

As we pointed out last week, the business case to import Quebec electricity just isn’t there in today’s power market. Don’t just take our word for it. Look at these direct quotes from the commission’s report. (The translation is ours.) It turns out that Quebec is awash in supply that it’s been overpaying for in costly, misplaced efforts to encourage alternatives:

“Electricity demand has flattened…. Despite this, Quebec has added important sources of production: wind, small hydro, biomass…. This reality results in an annual subsidy to electricity producers that will reach $1.2 billion in 2017, at the expense of power consumers and taxpayers.” (p. 21)

“In North America, including Quebec and Ontario, authorities subsidize renewable energy on their own territory… rather than pay a premium for clean energy imported from outside….” (p. 181)

That new supply has been costing Quebec much more than its traditional big hydro. To cover that cost, Hydro Quebec needs to export power at peak periods. Otherwise, it loses money:

“Today, these surpluses can only be disposed of on export markets. The first 10 TWh are exported at peak periods at high prices and are profitable for Quebec. The rest, about 20 TWh, is exported in off-peak periods at an average price of $0.03/KWh. But, the cost of energy from new production sources added since 2008 varies between $0.06/KWh and $0.12/KWh.” (p. 21)

The export channels, or “interconnects,” that export those profitable 10 TWh/year cannot handle a greater load:

“The additional (20 TWh) cannot be sold at peak periods because the current interconnects with neighbouring markets are saturated; it can only be sold in off-peak or base periods at prices that are too low to make recent investments profitable….” (p. 176)

More interconnects are not the answer in this market. Rather, the commission recommends against new export deals, and it calls on the Quebec government to trim the subsidized sources of supply within the province:

“There is no doubt in the Commission’s mind that the government of Quebec must immediately cease new requests for the production of electricity and that it must cancel contracts in the process of renewal….” (p. 184)

As we pointed out last week, this is one reason why actual deals for long-term electric power have been expensive in 2014 (more than 10 cents per KWh in the New England power pool).

Electricity exporters have to earn much more than the average cost of production from their big, efficient base-load generating stations – hydro dams in Quebec, and nuclear energy stations in Ontario. They also have to subsidize pricey alternatives. That’s why they need a sales price that covers production costs plus subsidies.  And any power supply that replaces Darlington must be not only large (over 3,000 MW), but available around the clock – not just off-peak or whenever the interprovincial connections allow it.

The bottom line: facts are facts. The price of power is what people pay for it, and not some made-up number based on flawed assumptions. In today’s market, a profit-seeking Hydro Quebec wouldn’t want to sell electricity to Ontario on a sustained basis below the cost of its most expensive production.

Here’s another fact: nuclear energy safely delivers reliable, low-cost power to Ontario. And, in displacing coal and natural gas from Ontario’s supply mix, nuclear energy reduces Ontario’s greenhouse gas emissions by nearly 90 megatons per year.

You’d think an organization that promotes clean air would celebrate nuclear’s zero-carbon emissions rather than generate a fog of fiction.

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