Diversifying the Mix: Alternatives to Conventional Generation

1. Diversifying the Mix: Alternatives to Conventional Generation CEA-NRCan Workshop Background Materials November 25, 2002

2. Topics Part 1 – Setting the scene Part 2 –Business context Part 3 – Managing the environmental agenda Part 4 – A focus on alternatives

3. Overview • We need to assure supplies of affordable, reliable power for Canadians delivered in an environmentally responsible way. • Industry and Government have to work together to create the right conditions for attracting the investment needed for a sustainable electricity future.

4. Part 1 Setting the scene

5. Expect slower than historical demand growth from 2010 to 2020 but still likely in excess of population growth. Canadian Demand, 1980 to 2000 and Projections to 2020

6. New Demand, plant replacement and exports require significant new capacity build over the next twenty years. By 2020, 205 TW.h from new, replacement & life extension – 35% of 2000 production. Indicates new and replacement investment of over 20,000 MW perdecade to 2020 (2000capacity ~ 112,000 MW). Canadian Supply Growth: Average of Modeling Results for 2010 and 2020

7. Existing major North-South inter-ties reflect historic market realities. Growing interest in inter-provincial transmission-but infrastructure is underdeveloped. New transmission needed to support competition, ensure reliability. Regulatory and tax changes needed to support transmission expansion. Transmission Capacity

8. Canadian Exports in 2001 to the U.S. represent approximately 7% of total Canadian generation and 1.2% of total U.S. consumption. U.S. exports to Canada have increased over the last few years. Time of day exchanges account for much of the growth. Canada/United States Trade(Volume of electricity Imports and Exports)

9. Part 2 The business context in 2003 and beyond

10. Economic Context • Growing demand despite economic uncertainty • Market restructuring continuing but on a less certain track • North American integration • Risk averse Capital Markets

11. Security Context • Electricity is a fundamental underpinning of the modern economy. • Security, reliability and power quality of growing importance • Security issue has long and short-term dimensions. • Fuel/technology diversity • Adequacy of supply • Operating reliability • Infrastructure protection

12. Environmental Context • Climate Change • Air Quality • Habitat/Species • Hazardous Materials and Waste • Health & Safety • Working with local communities

13. Part 3 Managing the environmental agenda…

14. We are making progress… • Electricity intensity is declining in part as a result of energy efficiency. • Emissions intensity of fossil production has been declining over the last ten years – and is set to decline further. • Effective habitat management is now the norm. • Waste & hazardous materials are increasingly subject to effective management regimes. • Community engagement is now the norm.

15. Industry is making a contribution:efficiency and emissions intensity… • Electricity intensity • Utility DSM programs – promoting energy efficiency • Association Quebecoise pour la Maitrise de l’Energie • Action By Canadians on climate change program (ABC)/Energy Council of Canada • Emissions intensity of fossil fuels • Electricity climate change covenant proposal • Electricity Industry Mercury Program

16. Industry is making a contribution:habitat/species protection & haz. waste… • Habitat/Species • Improved industry practices • CEA/DFO Memorandum of Understanding on the Fisheries Act • Hazardous Waste: • Nuclear waste – Bill C 27

17. Industry is making a contribution:alternatives… • Clean Coal: Canadian Clean Power Coalition • Improvement to CCA class 43.1 • Strong response to the Wind Power Production Incentive (WPPI) from the wind industry • Beginnings of technological diversity

18. PART 4 A focus on alternatives…

19. Defining terms…. • What is alternative power? • Sample definition: power produced from sources other than conventional generating technologies (nuclear, oil, gas, coal, and hydro) such as: wind, bio-gas, bio-mass, solar, geo-thermal, and distributed technologies such as micro-turbines and fuel cells.

20. Justifying the focus… • Need for continued diversity • Industrial development opportunities • Public demand • Environmental preferability

21. Identifying Barriers… • Fuel availability • Technology development • Capital costs • Barriers to market integration • Public knowledge • Division of authority between levels of government

22. Policy instruments to address the barriers… • Information programmes • R&D and related support initiatives • Production/consumption tax initiatives • Regulation • Encouragement for cooperation

23. Opportunities for Cooperation • Bilateral pilot projects between established utilities and alternative power developers/promoters • Investment by utilities in alternative power companies • In-house development of alternatives capacity by utilities • Gov’t-industry cooperation in promotion and development • Gov’t-industry dialogue on policy tools

24. Key Questions • Is there a priority ranking of barriers? • Is there a priority ranking of instruments to address the barriers? • Who are the key stakeholders in the debate on alternative energy? • How can cooperation between the stakeholders be facilitated? • How does the debate engage the consumer? • What is the role of the Government of Canada? • What is the role of electricity companies? • How does this play out in the broader North American context?

25. Conclusion • Three objectives underlie a sustainable electricity future: • Security & Reliability • Affordability • Environmental Performance • These three objectives require continuing investment. • Government and Industry need to continue working together to create the right conditions.