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Meeting Ontario s Need for Renewable, Reliable Electricity: OPG s Hydroelectric Initiatives and Strategy John Murp

2. Subjects to be Covered . OPG ProfileOPG Hydroelectric Profile Ontario's Supply ChallengesOPG Hydroelectric InitiativesOPG's Nuclear and Fossil Generation Summary . 3. OPG Profile . Generated 108.5 TWh in 200553.9 TWh in first 6 months 2006Produces approx. 70% of Ontario's electricity g

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Meeting Ontario s Need for Renewable, Reliable Electricity: OPG s Hydroelectric Initiatives and Strategy John Murp

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    1. Meeting Ontario’s Need for Renewable, Reliable Electricity: OPG’s Hydroelectric Initiatives and Strategy John Murphy Executive Vice President -- Hydro to the Canadian Hydropower Association Gatineau, Quebec October 26, 2006

    2. 2 Subjects to be Covered OPG Profile OPG Hydroelectric Profile Ontario’s Supply Challenges OPG Hydroelectric Initiatives OPG’s Nuclear and Fossil Generation Summary

    3. 3 OPG Profile Generated 108.5 TWh in 2005 53.9 TWh in first 6 months 2006 Produces approx. 70% of Ontario’s electricity generation Employs approx. 11,000 employees Operates: Three nuclear stations (10 operating units, total) Five fossil-fuelled stations 64 hydroelectric stations Capacity: 22,173 MW (at end of 2005)

    4. 4 Hydroelectric Profile

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    7. 7 Hydroelectric Profile: Safety Performance Hydro has surpassed 1 YEAR (> 1.63 million hours) without a lost time accident. Other injury-free milestones: Niagara Plant Group – 2.8 years Evergreen Energy – 6.1 years Northwest Plant Group – 6.3 years Ottawa/St. Lawrence Plant Group – 5.8 years Some work centres have achieved > 11 years without a lost time injury.

    8. 8 Hydroelectric Profile: Keys to Safety Success OPG and Hydro have established a high performance safety culture Safety more than just a top priority…it’s a core value Clear goals & objectives have been established Ultimate goal of “Zero Injuries” Visible commitment to safety…from board room to the shop floor Legislative compliance seen as the “minimum” standard Robust Safety Management Systems (based on OHSAS 18001) ensure continuous improvement Engaged employees Strong “partnership” approach to health & safety management Effective Joint Health & Safety Committees

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    10. 10 Ontario’s Supply Gap “Together, the combination of demand growth and generation retirements would create a gap of roughly 24,000 megawatts by 2025, equivalent to about 80% of Ontario’s current capacity.” Ontario Power Authority, Supply Mix Advice Report, December 2005 In its Supply Mix Advice Report, released Dec,. 2005, the OPA has forecast that a projected province-wide shortfall in supply capacity would emerge later in this decade and grow rapidly over time. The shortfall stems primarily from Ontario’s shrinking supply, with growth in demand as an important secondary factor. “The nature of the problem is clear: a lack of investment to expand electricity capacity in Ontario in the past decade. With supply already tight as a result of this under-investment, the sector faces the loss of a major part of its current supply mix as most units of its nuclear fleet reach the end of their design life over the next several years. The loss of nuclear generation would come immediately on the heels of replacement of coal-fired stations, scheduled for completion by 2009. Together, the combination of demand growth and generation retirements would create a gap of roughly 24,000 megawatts (MW) by 2025, equivalent to about 80% of Ontario’s current capacity.“ In its Supply Mix Advice Report, released Dec,. 2005, the OPA has forecast that a projected province-wide shortfall in supply capacity would emerge later in this decade and grow rapidly over time. The shortfall stems primarily from Ontario’s shrinking supply, with growth in demand as an important secondary factor. “The nature of the problem is clear: a lack of investment to expand electricity capacity in Ontario in the past decade. With supply already tight as a result of this under-investment, the sector faces the loss of a major part of its current supply mix as most units of its nuclear fleet reach the end of their design life over the next several years. The loss of nuclear generation would come immediately on the heels of replacement of coal-fired stations, scheduled for completion by 2009. Together, the combination of demand growth and generation retirements would create a gap of roughly 24,000 megawatts (MW) by 2025, equivalent to about 80% of Ontario’s current capacity.“

    11. 11 By 2025, Ontario must double its supply of electricity from renewable sources (hydroelectric, wind, solar, biomass)

    12. 12 OPG has a Mandate to Enhance and Expand its Hydroelectric Capacity Memorandum of Agreement between OPG and Shareholder (Ontario Government), signed August 17, 2005, states in part: “With respect to investment in new generation capacity, OPG’s priority will be hydro-electric generation capacity. OPG will seek to expand, develop and/or improve its hydro-electric generation capacity. This will include expansion and redevelopment on its existing sites as well as the pursuit of new projects where feasible. These investments will be taken by OPG through partnerships or on its own, as appropriate.”

    13. 13 OPG’s Management of Existing Hydroelectric Assets Independent benchmarking studies show plant performance and management systems are strong within the industry OPG is investing an average of $95 million per year to maintain and enhance hydroelectric capability OPG increased existing plant capacity by 400 MW since 1992 Further upgrades will add about another 150 MW by 2015 15 MW completed in 2006 11 MW currently underway in 2006

    14. 14 Hydroelectric Supply Initiatives: Niagara Tunnel OPG’s largest current capital project Diverts additional water to Beck hydroelectric stations 500 cubic metres of water per second 1.6 billion KWh average per year 10.4 km long Construction work underway Expected completion: late 2009 90 year life-expectancy Project is on schedule and within budget OPG is project manager Tunnel Boring began Sept 1

    15. 15 Hydroelectric Supply Initiatives: Lac Seul 12.5 MW addition to existing Ear Falls station in Northwest Ontario $47 million capital investment Construction underway Contractor: SNC Lavalin Expected completion -- late 2007

    16. 16 Some of OPG’s Proposed Hydroelectric Development Projects in Northern Ontario Lower Mattagami River Development (450 MW) Replace existing 75-year Smoky Falls station with new larger station add a generating unit to each of three existing stations Upper Mattagami River Development (35 MW) Replacing 3 existing old stations with 3 larger stations -- construction expected to start in mid 2007 Hound Chute Redevelopment (9 MW) Replace existing 95-year old station with a new larger (9 MW) station Other (Greenfield) Projects Little Jackfish River Development (132 MW) Albany River (350-1,000 MW)

    17. 17 Timeline of OPG’s Existing and Proposed Hydroelectric Projects

    18. 18 Timeline of OPG’s Greenfield Hydroelectric Projects

    19. 19 OPG’s Approach to Hydroelectric Development in Northern Ontario OPG will pursue economically viable hydroelectric developments Theoretical potential ~ 12,000 MW Practical/economic potential ~ 5,000 MW Most potential sites are in Northern Ontario and are restricted by existing government commitments Key issues: First Nations participation Transmission requirements Restrictions on Northern & Moose Rivers development Environmental considerations

    20. 20 First Nations Participation is Key Active involvement by First Nations in hydroelectric developments includes potential equity participation. Recent OPG Agreements signed with First Nations, including: Mattagami FN Taykwa Tagamou Nation Lac Seul First Nation Long Lake #58 First Nation These agreements are critical to ongoing hydro-electrical operations and future hydroelectric development

    21. 21 Transmission Requirements Significant development in northern Ontario will require new transmission lines to southern Ontario. Interim measure necessary for some projects (e.g. Lower Mattagami development). Longer term requirements to be addressed as part of OPA’s Integrated Power System Plan (IPSP).

    22. 22 Restrictions on Northern & Moose Rivers Development Site release commitments on Northern and Moose Rivers (4,500 MW): Commitment restricts developments greater than 25MW in four Northern Rivers (Albany, Attawapiskat, Winisk and Severn) No new development within Moose River basin north of Highway 11 without co-planning with First Nations (exception, Lower Mattagami Project) Parks designations in North restricts additional 1,500MW (Bill11)

    23. 23 Environmental Considerations Some flooding required for Northern Rivers/Moose River Basin developments Need harmonization of Federal and Provincial environmental approval

    24. 24 Government Directives: Nuclear Nuclear Refurbishment: Ont. Govt. has directed OPG to Undertake feasibility studies re. refurbishment of units at Pickering B & Darlington sites Begin Environmental Assessment (EA) on Pickering B refurbishment as part of this process OPG is now assessing the business case for refurbishing Pickering B New Nuclear Ont. Govt. has directed OPG to: Begin federal approvals process for new nuclear units at an existing facility Includes an environmental assessment On Sept. 22, OPG filed application for a Site Preparation Licence for new nuclear units at its Darlington nuclear site

    25. 25 OPG’s Fossil-Fuelled Stations Ontario Govt. responded in June to the Ontario Power Authority’s Supply Mix Report (Dec. 2005) The Govt. has asked OPA to determine how best to replace coal-fired generation in Ontario at the earliest possible time As a result…OPG’s coal-fired stations to continue operating beyond 2009 OPG to meet all environmental regulations governing the operation of its coal-fired stations OPG will make additional, prudent investments in environmental equipment and systems to further improve environmental performance of its coal-fired plants

    26. 26 Earning the Trust and Confidence of our Stakeholders is Essential to our Operations

    27. 27 Summary OPG will continue to maintain and improve the performance of its existing hydroelectric assets continue to invest in Northern Ontario. pursue all economically viable hydroelectric developments in the Province, mostly in Northern Ontario. seek involvement and partnerships with First Nations. continue to work with the appropriate government agencies and stakeholders to address existing development restrictions, transmission constraints and environmental considerations. continue to earn the trust & confidence of our major stakeholders and the communities where we operate

    28. Meeting Ontario’s Need for Renewable, Reliable Electricity: OPG’s Hydroelectric Initiatives and Strategy John Murphy Executive Vice President -- Hydro to the Canadian Hydropower Association Gatineau, Quebec October 26, 2006

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