Will gas suffocate small hydro?

Fenelon Falls Hydroelectric 2

Does the Ontario Government want fair competition in the generation of electricity?

It says it does, and that’s why it brought in Bill 35, to allow competition in electricity production. But proof of the Government’s commitment to fairness will be found not in the bill, but in regulations which are still being drafted.

And so far, there is no indication that the regulations will level the playing field for renewable energy.

At present, the field is heavily tilted in favour of natural gas, because the price at which it is sold includes nothing to account for the pollution it causes, and the contribution to global warming that it makes.

Make no mistake, Rob Macdonald says, « Compared to renewable energy, gas turbines (for generating electricity) are a cheap and dirty technology.’’ Macdonald is an associate professor in the Faculty of Environmental Studies at York University.

He is also a director of Shaman Power Corp., a private company  that has just opened a small hydro generating station at Fenelon Falls. Shaman has high hopes of being financially successful, but only because the contract for sale of its electricity to Ontario Hydro was approved on reasonable terms before Hydro abandoned its commitment to promote development of renewable energy.

The station was built for $4.9 million on the site of an existing dam, and, says Macdonald, there are hundreds of similar dams across Ontario where small hydro generating stations could be built. These dams were originally installed by lumbering companies that no longer need them.

However, unless the playing field is levelled, small hydro stations won’t be built at these sites, because they won’t be able to generate electricity at prices competitive with gas turbines.

Small hydro stations are expensive to build. Turbines burning natural gas are cheap to build. On the other hand, small hydro stations at old dam sites cause next to no new environmental damage. And gas turbines, wherever they’re built, emit carbon dioxide (CO2), the biggest contributor to global warming.

So small hydro gets saddled with a price disadvantage for being clean, while operators of gas turbines escape responsibility for polluting, and off load to the public the cost of harming the environment.

According to a study undertaken for the Independent Power Producers’ Society of Ontario, the cost of environmental damage, calculated in cents per kilowatt hours, is as follows for the different power sources:
coal                                              –     4.1¢
nuclear                                         –     3.28¢
hydro electric (building
big, new dams)                     –     1.75¢
natural gas cogeneration
(producing heat and
electricity)                              –     1.1¢
burning waste wood                   –     0.75¢
wind energy farms                      –     0.1¢
small hydro dams                       –     0.1¢

(In addition to CO2, coal plants emit nitric oxides, which contribute to smog, and sulphur oxides, which cause acid rain. Nuclear plants have their own lengthy list of environmental problems.)

I should point out that there’s a lot of controversy over what price to put on environmental damage. But the relationships among the various sources remain pretty much the same even though the specific calculations of cost may differ.

There are a couple of ways to level the playing field. One is to require all producers to include in the price of their electricity an amount that equals the cost of damaging the environment. And to require that the extra money raised be spent on environmental improvements.

Another way is to require all producers of electricity to include renewable energy as a portion of the electricity they produce. Some companies are prepared to do this and suggest 5 per cent would be appropriate. I think that’s ridiculously low, and would be nothing more than tokenism. A more realistic figure would be 20 per cent, which could be gradually phased in over a number of years.

Keep an eye on Queen’s Park. What the regulations say will speak volumes about the Government’s commitment both to the the environment and to real competition.

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