September 2007 - On August 29, 2007, the Ontario Power Authority officially introduced the Integrated Power System Plan (IPSP). This is effectively the first comprehensive electricity supply plan for Ontario in more than fifteen years. The plan has been two years in the making and is designed to assist Ontario’s Conservation and supply resources goals, as defined in the Supply Mix Directive June 2006, through effective management of electricity supply, transmission, capacity and demand. By 2010, the Directive seeks to reduce demand by 1,350 MW and have a renewable supply capacity of 10,402 MW. Long-term goals for 2025 aim at reducing demand by an additional 3,600MW and operating a renewable supply capacity of 15,700MW. IPSP will help Ontario work towards meeting these future power demands without the use of coal and will consequently lower greenhouse gas emission levels.

The IPSP represents an ongoing capability to meet resource requirements across a range of conditions. It focuses on:

1. Reduction in demand by consumers
2. Replacement of coal fired generation by natural gas and renewable resources
3. Restoration or replacement of the province’s baseload facility nuclear capacity
4. Development in increased flexibility from natural gas and purchase options
5. Implementation of transmission, generation and system efficiency

The OPA plan is designed to offset any growth in peak demand arising from increased population and economic growth for the next 10 years or more and will result in almost doubling the generating capacity in the province over the next 20 years. The IPSP will be reviewed every 3 years to take advantage of changing technologies and changing priorities.

Focus on Conservation and Emission Reductions
The initial focus of the plan is on conservation and takes priority over any new form of supply. With 6,300 MW of total peak demand being eliminated through conservation by 2025, it’s like removing one house in five from the grid. As well, the OPA is seeking to exceed its 2025 targets, although objectives have not yet been set and they are continuing to focus on reduction targets set for 2010. Going forward, more than $10 billion will be spent on conservation alone. The implementation of the plan brings major environmental benefits through the reduction of emissions. The expectations are as follows:

Supply Side:
There is a gap of 85 TWh (85 Trillion Watts) that must be filled after contributions from planned conservation and renewable resources. Although the OPA does not intend to procure any nuclear supply by 2010, an additional 15, 000 MW are planned for 2015. This will include 6,434 MW needed to replace coal fired generation.

Cost:
The IPSP is expected to cost nearly $60 billion by 2025 (in 2007 dollars) broken down as follows:

While there is $4.0 billion allocated for transmission, it is not being classified as distribution costs, which are more at the LDC level. Of the transmission total, some $3 billion (or 75 percent) is for transmission enhancements to facilitate renewable resources. These investments have different expected lives. For example, a hydroelectric plant has an expected life of 100 years as opposed to 20 years for a gas fired generation station. It is therefore misleading to simply characterize this plan by its capital cost.

A more useful strategy is to consider the cost of these new investments alongside the cost of current and committed resources and how these affect electricity prices and customer bills. While it is foolish to make sweeping price forecasts, since this depends on many additional factors, the overall picture seems to be that longer life assets will cost proportionally less per year than shorter life assets will. This is very important. While consumers may initially see a 15 –20 % increase in cost from current levels, Ontarians who aggressively conserve will actually see a decrease in their overall electricity costs.

Other benefits, besides long term cost reductions, include an improved environment for the province and beyond. IPSP will see a significant decrease in GHG emissions and air pollutants that will ensure a safer and sustainable environment.

Energy Advantage’s advisory is that all Ontario energy consumers consider hedging strategies so that they can ensure maximum benefits from IPSP in terms of mid to long-term reductions in overall electricity costs. Customers should further ensure that they are forward looking in terms of planning for energy efficiency projects.

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Editorial Contacts:
Dan Morel
Energy Advantage Inc.
(905) 319 1717 x 353
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