electricity 101 slide deck_december 2010
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Canadas Electricity Industry"Background and Challenges"
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Presentation Outline!
Introduction & Context
State of Canadas Electricity Industry
Key Challenges
Policy Implications
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CEAs Corporate Utility Members!
Manicouagan PowerCompany Limited
City of Medicine HatElectric Utility
Distribution
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CEA Mission Statement
A safe, secure, reliable, sustainable and competitively priced supply of
electricity is essential to Canadas prosperity. CEA is the voice of the
Canadian electricity industry, promoting electricity as the critical enabler
of the economy and Canadians expectations for an enhanced quality of
life.
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CEA Strategic Goals
Infrastructure Ability to build needed electricity infrastructure, to meetgrowing demand and replace aging assets.
Energy Efficiency Ability to provide options to customers to assist them inusing electricity more efficiently, manage costs and minimize environmental
impacts.
Technology Ability to maximize and deployleading-edge technologies.
Regulation Need formore coordinated, effective and efficient regulatoryregimes within and between governments, and more timely decisions.
Environment Need for holistic approach and greater regulatory coherence onenvironmental issues.
Security Need to ensure the long-term security, reliability and stability of theelectricity system.
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The Great Divide: Canadas Multi-Jurisdictional Environment!
Jurisdictional Division of Responsibility!
Provincial/Territorial Governments! Federal Government"
resources management withinprovincial boundaries
intra-provincial trade and commerceintra-provincial environmental impactsgeneration and transmission of
electrical energyConservation and demand response
policies
resource management on frontier landsnuclear safetyinter-provincial and international tradetrans-boundary environmental impactsenvironmental impacts where federal
lands, investment or powers applyOther policies of national interest"
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Status of Market Restructuring!
SaskatchewanWholesale open
accessFunctional separation
AlbertaMandatory Power PoolWholesale & retail open access
since 2001
ManitobaWholesale open accessFunctional separation
OntarioIndustry unbundling in 1998
Wholesale & retail open accesssince 2002
QubecWholesale open accessFunctional separationWholesale competition for
domestic load >165 Twh
NewfoundlandEnergy policiesunder review
New BrunswickWholesale & large
industrial openaccess
Nova ScotiaWholesale open
access
FunctionalSeparation
BC
Wholesale & industrialopen accessIndependent transmission
entity
PEIOpen access
Transmission Tariffapplication pendingregulatory decision
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North American Electric Reliability Corporation
(NERC) Regions!
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The State of Canadas Electricity Industry
Demand and Supply
Trade and Economics
Transmission and Distribution Environment and Climate Change
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Electricity Demand in Canada by Sector, 2008!
10!
Total Electricity Demand in Canada, 2008 = 548.8 TWh
*Numbers may not sum to 100 percent due to roundingSource: Statistics Canada, Energy Statistics Handbook, Q4:2009
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Electricity Demand in Canada by Sector, 1990 - 2008!
Total Electricity Demand in Canada, 2008 = 548.8 TWh
Source: Statistics Canada, Energy Statistics Handbook, Q4:2009
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Electricity Generation in Canada by Fuel Type, 2009!
Total Electricity Generation in Canada, 2009 = 575.2 TWh
*Numbers may not sum to 100 percent due to rounding.Source: Statistics Canada, Survey 2151, 2010
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Electricity Generation in Canada by Fuel Type, 1990 - 2009!
0
100
200
300
400
500
600
700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Genera&on(TWh)
Wind Tidal Combustion Turbine
Internal Combustion Nuclear Conventional Steam
Hydro*
*Prior to 2008, wind and tidal generation are included in hydro.Source: Statistics Canada, Survey 2151, 2010
Total Electricity Generation in Canada, 2009 = 575.2 TWh
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Electricity Generation in Canada by Province and Fuel Type, 2009!
-50
0
50
100
150
200
250
BC AB SK MB ON QC NB NS PEI NFLD
Generation(TWh)
Tidal Wind Combustion Turbine Internal Combustion Nuclear Conventional Steam Hydro
Source: Statistics Canada, Survey 2151, 2009
Total Electricity Generation in Canada, 2009 = 575.2 TWh
59.662.2
33.8
13.1
38.4
11.6
143.7
0.1
193.8
18.4
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Electric Generating Capacity in Canada by Fuel Type, 2009*!
Hydro58.0%
ConventionalSteam
20.5%
Nuclear10.3%
CombustionTurbine
8.0%Wind2.7%
Tidal
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Average Residential Electricity Price in Canada, 1998 2009
(2009 cents/kWh)!
9.779.67
9.40
9.589.66
9.85
9.58
9.799.94
10.3410.44
10.82
8.5
9.0
9.5
10.0
10.5
11.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2008Cents/k
Wh
Source: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 1998 2009.
Notes: Based on 1,000 kWh monthly consumptionAverage electricity price is an average of 11 major Canadian cities and may not represent an exact national average.Prices have been adjusted from current cents/kWh to 2008 cents/kWh
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Good Neighbors: North American Bulk Transmission Lines!
20!
Total Length of High Voltage TransmissionLines (>230 kV) in Canada = 74,640 km
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Utility Investment in Canadas Transmission & Distribution
Cables & Lines, 1998 - 2007!
Source: Statistics Canada, Survey 2803, 2009
21!
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Transmission Lines in Canada (>230 kV)
Length by Voltage, 1990 - 2007!
Source: North American Electric Reliability Council (NERC)
22!
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Environmental Protection Expenditures by the Electric
Power Sector, 1996 2008 !
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
1996 1998 2000 2002 2004 2006 2008
Millionsofdollars
Operating
Capital
Source: Statistics Canada, Environmental Protection Expenditures in the Business Sector, 2008
Total electric sector environmental protection expenditures, 2008 = $1,288 million
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Greenhouse Gas (GHG) Emissions in Canada by Sector, 2008!
Transportation26.9%
Other Energy*18.8%
Electricity & HeatGeneration
16.1%
Fossil FuelIndustries
9.2%
Agriculture
8.5%
IndustrialProcesses
7.1%
Residential5.8%
Commercial &Institutional4.7%
Waste & Other2.9%
Total GHG Emissions in Canada, 2008 = 734 Megatonnes CO2 Equivalent
Source: Environment Canada, National Inventory Report 1990 2008*includes stationary sources such as mining, manufacturing, and construction, and fugitive sources.
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Sulphur Oxide (SOx) Emissions in Canada by Sector, 2007!
Source: Environment Canada, Criteria Air Contaminants Emissions Summaries
Total SOx Emissions in Canada, 2007 = 1,904 Kilotonnes
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Top Challenges facing the Canadian Electricity Industry
1.Infrastructure renewal and new build
2.Technology shift and Supply Mix Planning
3.Access to U.S. markets
4.Employment and critical skills
5.Capital formation and balance sheet issues
6.Addressing Climate Change and Reducing GHG Emissions
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Context for Infrastructure Renewal and New Build
Canada needs to invest in electricity infrastructures renewal andreplacement in order to meet growing demand.
Canada needs a combination of generation sources that will ensuresecurity, reliability, affordability that will minimize environmental
impact. The need to address climate change is driving infrastructure renewal
The demand for electricity is increasing and will require an increasein base load generation
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Properties of Electricity: The Constants
1.Reliability
2.Cost- effectiveness
3.Safety4.Sustainability (environmental, social and economic)
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Building the Next Generation of Infrastructure:
Capital Investment Requirements!
(Billions of 2007 CDN dollars)
Generation Transmission Distribution Total
2007 2015 40.3 15.2 32.8 88.3
2016 2030 93.7 17.6 38.0 149.3
Total to 2030 134.0 32.8 70.8 237.6
Source: International Energy Agency, World Energy Outlook 20082007 US-CAN exchange rate: Bank of Canada
Total Canadian Electric Sector Investment Required by 2030 = $CAN 237.6 Billion
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Challenge: Infrastructure Renewal and New Build
Securing permission to renew, build and operate will requirestreamlining of regulatory approvals processesFisheries Act
Canadian Environmental Assessment Act (CEAA)
Species at Risk Act (SARA)
Investment in the electricity sector will require increases in electricitypricesAs investment in the electric power sector increases, companies will need
to pass those costs through to customers
Provincial regulatory authorities will monitor cost prudency
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Industry Progress towards Infrastructure Renewal
Memorandum of Understanding (MOU) with Department of Fisheries(DFO)
2010 Review of CEAA
Active participation in five year review of SARA
Open lines of communication with Major Projects Management Office(MPMO)
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Federal Programs Supporting Electricity
Infrastructure Investment! Major Projects Management Office MPMO (2007)
Streamline regulatory review of major resource projects
ecoENERGY for Renewable Power (2007) One cent per kWh for up to 10 years to renewable electricity projects
constructed between April 1, 2007 and March 31, 2011 ecoENERGY Technology Initiative (2008)
Co-funding for Clean Coal and Carbon Capture and Storage (CCS) andCleaner Fossil Fuels
Clean Energy Fund (2009) $1B over 5 years for clean energy research, development and
demonstration projects $150M for research; $650M for CCS; $200M forother technologies
Green Infrastructure Fund (2009) $1B over 5 years for sustainable energy projects
Yukon Energys Mayo B and Carmacks-Stewart line first to receive funding
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ecoENERGY Technology Initiative Projects!
Heartland Area Redwater Project (ARC Resources)
Integrated Carbon Capture and Enhanced Oil Recovery(Enhance Energy)
Fort Nelson Exploratory Project (Spectra Energy Transmission)
Pioneer Project (TransAlta)
CO2 Injection in Heavy Oil Reservoirs (Husky Energy Inc.)
Source: Natural Resources Canada, ecoENERGY Technology Initiative
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Active MPMO Electricity Sector Projects!
Source: Major Projects Management Office, Project Tracker
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MPMO Project Name Description Proponent Project Type LocationBruce to Milton Transmission Reinforcement Project 500 kV line Hydro One Transmission ON Labrador - Island Transmission Link 1,200 km line Nalcor Energy Transmission NLLower Churchill Hydro Project 2,00 MW Nalcor Energy Hydro NLPointe Du Bois Hydro-Electric Modernization Facilities Decommission Manitoba Hydro Hydro MBDarlington New Nuclear Power Plant Up to 4,800 MW OPG Nuclear ONMarten Ridge Wind Energy 80 MW Premier Renewable Energy Wind BCMount MacDonald Wind Power 250 MW Rupert Peace Power Wind BC
Naikun Wind Energy 320 MW (off-shore) NaiKun Wind Development Wind BCNicomen Wind Energy 70 MW Premier Renewable Energy Wind BCRocky Creekwind Power 500MW
Rupert Peace PowerCorportation
Wind BC
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Selected World Residential Electricity Prices, 2009!
0 5 10 15 20 25 30 35
United States
Mexico
Canada
Switzerland
Turkey
Finland
France
Poland
Spain
Austria
United Kingdom
Ireland
Hungary
Italy
US cents/kWh
Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities,2009Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009
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Selected World Industrial Electricity Prices, 2009!
0 5 10 15 20 25 30 35
FranceUnited States
Canada
Spain
Switzerland
Finland
Mexico
PolandTurkey
United Kingdom
Portugal
Hungary
Ireland
Italy
US cents/kWh
Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities,2009Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009
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Selected Commodity Price Indices (Monthly)!
Source: Statistics Canada, Surveys 2306, 2318, 2325
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Challenge: Technology Shift
Technological shift and innovation will help Canada meetenvironmental expectations
Development of the Smart Grid will enable increases in energy
efficiency and further integration of renewable energy technologies
Despite the current economic downturn, global competition forelectricity infrastructure resources may result in supply chain issues inthe long term
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Key Emerging Technologies for Electricity Generation in Canada!
Resource Advantages Challenges
Wind Power No fuel cost, no emissions or waste, and commerciallyviable source of power
Obtaining access to grid, wind does not alwaysblow, most wind farms operate at 25-35% capacity
Small Hydro Low capital costs, many potential sites in Canada, wellestablished technology
Regulatory approval can be costly and timeconsuming, local opposition to new development
Biomass Uses landfill gas and waste products to create electricity,reduces greenhouse gas, high availability of sites
High start-up and operating costs, produces someemissions
GeothermalEnergy Reliable source of power, low fuel and operating costs,clean and renewable source of energy High capital costs, connecting to the grid can bedifficult, few potential sites in Canada
Solar PV Fuel is free, suitable for areas where fossil fuels areexpensive or where there is no connection to the grid
Restrictive and unclear grid connection standards,not cost competitive, sun does not always shine
Fuel Cells Fast start-up time, very low emissions, wide range ofapplications
Technological breakthroughs are needed for fuelcells to be commercially viable
OceanEnergy
Costs are expected to decline as technology develops,intermittent, but predictable source of green energy
Potentially intrusive to marine life, investment isneeded to promote research and development
Clean Coal Highly efficient, potential for reduced greenhouse gasemissions
High capital costs, lengthy start-up period
DemandManagement
Could be a least-cost option, postpones the developmentof new power plants, improves energy efficiency
If the cost is high, consumers may not perceivepotential benefits, participation by industry is notuniversal
Source: National Energy Board, Emerging Technologies in Electricity Generation, 2006
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Canadian Electricity Statistics"By the Globalnumbers
5 Canadas world ranking inprimary energy production
7Canadas world ranking inprimary energy consumption
26 Per cent of Canadas total .exports that were energy.related
2Canadas ranking inHydroelectricity generation
By the Domesticnumbers
15Per cent of Canadas electricityproduced from nuclear generation
23 Per cent of Canadas electricityproduced from thermal generation
62Per cent of Canadas electricitygenerated from hydropower
598 Terawatt-hours of total electricity generation
Page 42 Centre for Energy, 2008 Canada wide Statistics
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Installed Wind Capacity in Canada as of December 2009!
Source: Canadian Wind Energy Association, 2010
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Smart Grid: Benefits and Challenges!
Actively monitor and more efficiently control the two-way flow ofelectricity
Allow variable generation sources to be reliably integrated in the
power system Improve efficiency through time of use pricing, reducing
transmission congestion and power interruptions
Requires more comprehensive planning approaches toelectricity infrastructure development and system management
Adaptation of existing infrastructure to be interoperable withnew, advanced technologies
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Global Competition for Electricity
Infrastructure Resources!
(Billions of 2007 CDN dollars)
Generation Transmission Distribution Total
Canada 134.1 32.8 70.8 237.6
North America 1,628.3 385.4 828.7 2,842.4
OECD 3,706.9 731.6 1,696.0 6,134.4
Source: International Energy Agency, World Energy Outlook 20082007 US-CAN exchange rate: Bank of Canada
OECD Electric Sector Investment Required by 2030 = $CAN 6,134.4 Billion
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Challenge: Access to U.S. Markets
Grid interconnection and reliability is essential to maintaining theimportant electricity trade relationship between the U.S. and Canada
A national U.S. Renewable Portfolio Standard (RPS) could have
potentially negative impacts on this trade relationship
Critical Infrastructure Protection (CIP) impacts
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Major Canada-U.S. Transmission Interconnections!
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Canada-US Electricity Trade Revenue, 1990 2009!
Source: National Energy Board, Electricity Exports and ImportsNote: Trade figures have been adjusted from current dollars to 2009 constant dollars
= $2.35 Bn in 2009
= $0.65 Bn in 2009
= $1.7 Bn in 2009
California Energy Crisis
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Exports & Imports Between Canada & US 2009!
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Federal Government Direct Spending for Energy!
2009 US Stimulus Package = $45.5 billion
2009 Canadian Budget = $2.7 billion
Sources: Troutman Sanders LLP February 2009 Advisory, Support for Energy in theStimulus Package; Department of Finance, Canadas Economic Action Plan, Budget 2009.
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Security and Infrastructure Protection Program!
CEA Security and Infrastructure Protection (SIP) Committee actsas an advocate for security issues and emergency preparedness
Coordination and guidance for protection of the industrys critical
infrastructure against: All hazards Physical incidents and threats Cyber incidents and threats
Coordination with the NERC Critical Infrastructure Protection(CIP) Committee to assure consistency with North Americanpartners
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Challenge: Industry Employment and Critical Skills
Recruitment and retention of electricity sector workers will be essentialto renew, build and operate new electricity infrastructure in light offuture retirements
Recruitment and retention of engineering and scientific personnel, aswell as trades, crafts and specialty skills is of particular importance
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Average Age Profile of Non-Support Electricity Industry
Employees!
Source: Electricity Sector Council Employer Survey, 2008
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Characteristics of Canadas Electricity Sector Workforce
28.8 percent of the current electricity workforce is expected to retire by2012.
More than 50 percent of workers in the generation (excluding
renewables), distribution, and integrated utility lines of business areover 45 years of age.
The line of business expected to be most affected by futureretirements is transmission, which will see retirements increase bymore than a factor of nine by 2012.
In 2012, electricity sector workforce supply is projected to fall short ofdemand by more than 3,000 workers (based on electricity demandgrowth of 1.8 percent annually).
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Challenge: Capital Formation and Balance Sheet Issues
Tax treatment of assets and new electronic equipment will impactinvestment in electricity infrastructure
Options may exist for patient capital that have not yet been explored
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Challenge: Lowering Carbon Emissions of the
Canadian Economy
Canada has set objectives of 17 percent emissions reductions from 2005levels and 90 percent non-emitting electricity generation by 2020
The 2010 proposed GHG framework will require all existing coal-firedelectricity generation, upon reaching end of economic life, to meet a GHGemission standard equivalent to that achieved by an NGCC facility
Canada needs to engage in forecasting and long-term planning forelectricity sector infrastructure investment with an effective supply mix
Electrification of the transportation sector will increase electricity demand
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Federal Regulation of GHG emission regulation in
Canada
Federal commitment to reduce national greenhouse gas emissions by 17percent below 2005 levels by 2020, and by 60 to 70 percent by 2050.
Federal government may require the electricity sector to reduce itsemissions by more than the national target.
Goal of achieving 90% non-emitting electricity generation by 2020. Federal government intent was to arrive in Copenhagen (December 2009)
with domestic policies in place for all sectors.
Prentice announced the federal governments intent to allign Canadasclimate change policy with that of the U.S. In terms of both targets and form(February 2010).
Prentice proposed a GHG Framework for coal-fired electricity generationbased on a NGCC facility, the framework to be executed under the CEPA(April 2010).
The regulations are scheduled to come into effect on July 1st, 2015 andare expected to reduce GHGs by 15MT.
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U.S. And International GHG development in Canada
In December 2009, US EPA promulgated its endangerment finding withrespect to GHGs.
COP15 resulted in Copenhagen Accord, which required developed countriesto submit national emissions targets for 2020 by January 31, 2010.
US committed to reduce US GHG emissions by 4 percent below 1990 levelsby 2020 or 17 percent below 2005; pending legislation.
In December 2010, the EPA enacted its endangerment finding, which allowsthe EPA to regulate GHGs under the Clean Air Act.
Commencing July 2011 new sources producing 100,000 tons of GHG or
more and existing facilities that increase emissions by 75,000 tons mustobtain a permit. The permit will demonstrate the use of best available
control technologies.
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Projected Electricity Generation Mix in 2020!
2020 projected generation1
(75% non-emitting)90% non-emitting2
Emitting
Non-Emitting
1 Based on the National Energy Boards forecast Canadas Energy Future (2007) and input from CEA member companies.2 Generation mix if 90 percent of Canadas generation in 2020 is non-emitting.
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Translating the Shortfall into Generation Options!
The following options illustrate the magnitude of the non-emitting generation additions (by fuel type) that would berequired to replace 110 TWh of emitting generation.
15,000 MW of Nuclear Capacity1
21,000 MW of Hydroelectric Capacity2
21,000 MW of Clean Coal with CCS3
42,000 MW of Wind Capacity4
1 Based on an average capacity factor of 85% for nuclear2 Based on an average capacity factor of 60% for hydro3 Based on an average capacity factor of 60% for clean coal with CCS (including a 30% energy penalty)4 Based on an average capacity factor of 30% for wind
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Policy Implications
Infrastructure
Technology Shift
Access to US markets
Employment and Critical Skills
Addressing Climate Change and Reducing GHG emissions
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Policy Implications Infrastructure
More effective policy/regulatory frameworks and processes
Industry alignment with provincial and federal regulatory authoritiesto reconfigure transmission and distribution systems in order tosuccessfully implement new sources of energy
Build understanding of need for electricity infrastructure investment Equitable rates of return
Ability to recover costs through rates
Public acceptance- the not in my backyard (NIMBY) phenomenonhas implicated many electricity developments
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Policy Implications Technology Shift
Funding for developing technologies
Improved tax treatment
Promotion of distribution and end-use technologies (Smart Grid)
Greater understanding of technology options
Greater understanding of the supply mix and the suitability oftechnologies to serve load
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Policy Implications Access to U.S. Markets
Continued active involvement with the North American ElectricReliability Council (NERC)
Consideration of U.S. climate change policies
Consideration of U.S. rates of return
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Policy Implications Employment and Critical Skills
Raising awareness about careers in the electricity sector
Aboriginal engagement
Foreign credential recognition
Recognition of HR/training requirements as cross cutting issues
Continued support and funding of the Electricity Sector Council
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Policy Implications Lowering Carbon Emissions in the
Canadian Economy
Align emissions reductions targets with capital stock turnover
Avoid stranding existing assets
Provide sufficient compliance mechanisms
Comparable effort
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Desired Outcomes and the Path Forward!
Robust Canadian electricity sector within interconnected NorthAmerican marketplace
Canada seen as destination of choice for electricity investment
Efficient, effective, coordinated regulatory environment Fair, balanced, performance-based economic regulation
Coherent policy vision
Clean, affordable, reliable electricity for Canadians
The path towards 90% non-emitting technologies
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For More Information...!
Priya Patel
Economic and Electricity Policy Analyst
Canadian Electricity Association
613-288-0248patel@electricity.ca
www.electricity.ca
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