Ontario's Electricity Market: a Brief Historical Overview




This post offers a brief historical overview of Ontario's electricity market. As obviated by the series of below-listed events, the history of Ontario's electricity market experienced a grandiose beginning with the opening of the world's largest hydroelectric plant. It wasn't too long thereafter, however, that Ontario's electricity-generating capacity began overstretched by an increase demand for electricity in the face of a growing economy. Plants to bridge the growing "supply-demand" gap in Ontario's electricity market by building new coal-fired electricity generating plants and nuclear power plants were rapidly bogged down by increasing environmental concerns.

A. THE PROBLEM: LOOKING BACK


1925 Ontario Hydro (“OH”) builds Beck 1 (formerly known as Queenston-Chipawa), world’s largest hydroelectric plant. Ontario meets the growing electricity demands through hydroelectric facilities.

1950s Onwards - the post-World War II economic boom causes Ontario’s waterpower sites to be over-exploited; Ontario’s electricity supply problem begins. Solution?

1970-90s - OH builds coal-fired generation and nuclear power plants; 20 power reactors are brought into service. Problem?

1990s onwards - all energy projects are subject to the province’s Environmental Assessment Act, R.S.O. 1990, c. E. 18. Plans to remedy Ontario’s electricity supply problem with new coal-fired and nuclear power plant facilities are abandoned. Solution?

1995 - Mike Harris and the MacDonald Committee propose: (1) a restructuring of Ontario’s electricity market; (2) the elimination of Hydro One’s monopoly; (3) to open up Ontario’s electricity market to competition.

1996 - OH proposes: (1) closing 7 of 19 operational reactors; (2) spending $5 to $8 billion dollars to refurbish Ontario’s electricity infrastructure. OH relies on coal-fired generation facilities, resulting in an increase in GHG emissions, smog, and acid raid.

1997 - amidst concerns over aging nuclear power plants, a comprehensive report entitled “Charting a Course for Competitive Electricity and Jobs in Ontario” offers a detailed plan to open the market for electricity supply.
  
1998  - the Energy Competition Act, 1998 (“ECA”) receives Royal Assent on October 30, 1998. The preamble of the ECA states in part: “An Act to […] protect consumers by promoting low-cost energy through competition […]”.

2002 - Ontario’s electricity market opens. Unusually warm weather, a reduction in domestic generating capacity, and an increasing reliance on limited import capacity leads to sharp increase in the price of electricity in Ontario (6.2¢/kWh).

2002 - Electricity Pricing, Conservation and Supply Act (“EPCS”): the retail price of electricity is capped at 4.3¢ per kWh, with 100% rebate for any portion in excess thereof; transmission and distribution rates on electricity are frozen.

2003 - all political parties include a coal-phase out plan in their election platform. Ontario Liberal Party under Dalton McGuinty commits to a phase-out by 2007.

2003 - Major blackout experienced in eastern North America reinforce concerns over the supply of electricity in Ontario. The ‘Electricity Conservation and Supply Task Force’ affirm that the market approach adopted in the 1990s needs substantial enhancements. The Ontario Electricity Restructuring Act is passed, and the Ontario Power Authority is created. One of its four mandates is to address electricity supply issues.

2009 – the Green Energy, 2009 (“GEA”) is enacted. The GEA seeks to expedite the growth of clean, renewable sources of energy, like wind, solar, hydro, biomass and biogas. Among many other things, the GEA seeks to create: (1) a “Feed-in Tariff” that guarantees specific rates for energy generated from renewable sources; (2) a right to connect to the electricity grid for renewable energy projects; (3) a streamlined approval process; (4) the implantation of a 21st century “smart” power grid to support the development of new renewable projects and technologies (e.g. electric cars).

B. THE PROBLEM: LOOKING FORWARD

Problem 1: Due to environmental concerns and despite being a significant source of electricity supply, coal-fired electricity generation plants in Ontario have been phased out and are no longer an option. The result is a shortage in electricity supply.

Problem 2: Over the next 20 years, it is expected that approximately 80% of the province of Ontario’s electricity generation capacity will need to be replaced.

Problem 3: The impending end-of-life shutdown of nuclear generation capacity by 2025.The steady increase of summer peak-demand in normal weather patterns.

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