Sunday, October 29, 2006

Coal-based power generator contemplates acquiring nuclear, IGCC plant
In my September 14 post, I predicted that coal-based generating companies operating in carbon trading areas would begin acquiring nuclear assets as a way of hedging against carbon prices. Platts Commodity News quotes an NRG Energy official as saying the company (which operates in the RGGI area, and whose generating assets are primarily coal-fired) is thinking of building nuclear and coal-gasification (IGCC) plants.

I and others have throughout the summer been advocating a carbon market in Canada as part of our response to our country’s Kyoto commitments. And, as I and others have pointed out, nuclear generation is by far the most realistic means of reducing generation-related emissions in areas, like Ontario, that lack or have tapped out hydro resources.

However, nuclear is also the most capital-intensive, and carries the biggest long-term financial risk. This is why so few private companies are willing to invest in it.

Of course, a carbon market will not by itself solve this problem. But in combination with other incentives—such as the construction delay insurance, loan guarantees, and power production tax credits that were written into the U.S. Energy Policy Act of 2005—the creative financing available under a carbon market could spur investment in nuclear generation plants.

And there are other approaches, such as long-term power purchase agreements based on fixed prices. These would provide additional stability in highly or even partially regulated markets (like Ontario’s). In liberalized markets, long-term purchase agreements could entice major power users, as they did in the case of Finland’s Olkiluoto plant, to contribute to construction project financing.

What role could Canadian governments have in these? Ontario already provides power price guarantees to major power consumers. Up to now these have usually been one-off agreements, done in secret and on the fly, in response to economic pressure from companies threatening layoffs.

In principle, there is nothing wrong with the government providing a private-sector power consumer with insurance against price increases. But this should be written into policy. The government wants to encourage public–private partnerships in electricity investment. This is a perfect opportunity for the Ontario government to kill two birds with one stone: add much-needed new generating capacity, and dramatically reduce emissions.

Such arrangements could and should also spur investment in coal gasification plants. But that is another post. Stay tuned.

Sunday, October 22, 2006

Harper’s made-in-Canada plan avoids mentioning the unmentionable
In my October 20 post, I said that Ontario is the scene of the first wave of major emission reductions in Canada. These reductions are taking place in the electric power generation sector, where the two nuclear generation companies, Ontario Power Generation and Bruce Power, are returning laid-up reactors to service.

Since 2000, OPG has brought back two 515 megawatt reactors at the Pickering nuclear station. Combined, they now displace around 8 million tonnes of emissions every year. Bruce Power plans to bring back the final two of its laid up 750-mW units. When these two reactors are producing electricity at a high capacity factor they will each year relieve Ontario of the necessity of generating over 10 billion kilowatt-hours of baseload power with coal. Hence they will prevent a further 10 million tonnes of CO2 from entering the atmosphere every year.

The current provincial Liberal government came into power vowing to close Ontario’s coal-fired power plants in order to wipe out the emissions they produce. In view of this, you can be forgiven for wondering why the Liberals don’t make the point I just made about emission reductions from nuclear generation. After all, the Liberals are the ones who gave the green light for the second Pickering reactor rebuild. More important, they are planning a new wave of nuclear construction.

You can really be forgiven for wondering about this given the recently proposed federal Conservative Clean Air Act. Ontario environment minister Laurel Broten told Global TV’s Sean Mallen on Saturday’s Focus Ontario what she thinks of the Conservative plan. After trashing it, she told Mallen that Ontario is leading the way on Kyoto by closing the coal plants. This is a bit strange, given that none of the four targeted coal plants has actually been closed (and won’t be for the foreseeable future). Broten might have more credibly pointed to the actual, million-tonne emission reductions that have resulted from the returns of the two Pickering units.

Moreover, Broten said that the federal government owes Ontario over $500 million (from Paul Martin’s May 2005 deal with Dalton McGuinty). Why didn’t she say that money would pay for the nuclear rebuilds—since that is where government-driven electricity investment is going anyway—and say Prime Minister Harper could hasten real reductions by providing yet more support?

This is only a mystery if you don’t factor in partisan politics (see my October 3 and October 5 posts). But sooner or later someone, either in Toronto or Ottawa, will rise above this. The question is who, and when.

Friday, October 20, 2006

Harper’s made-in-Canada Kyoto plan: concrete or nebulous?
First off: the made-in-Canada plan just shifts targets and baselines. Instead of reducing emissions to six percent below the 1990 level by 2012, Canada will reduce them to 45–50 percent below 2003 by 2050. Not as ambitious as the California plan; but, its few supporters say, it is more realistic.

Of course, the targets and timelines can change, and probably will. The plan released yesterday is similar to what the Liberals offered, in that it avoids the central question: precisely (or even generally) how will we actually achieve these emission reductions? Such details will be determined by yet more consultations.

To mollify the public, the Conservatives have torn a page out of George Bush’s playbook, and attempted a Frank Luntz–esque reframe of the whole issue. Now, instead of greenhouse gases and climate change, it’s clean air. Who could possibly be against that?

The Conservatives shouldn’t fool themselves into thinking that this kind of gambit, by itself, will keep the wolf from the door. It isn’t just Frank Luntz’s rhetorical genius that has enabled George Bush to delay meaningful action on air emissions in the U.S. As soon as he took office, Bush had to deal with the 2001 California electricity crisis. He has had to deal with the extreme volatility in the price of natural gas ever since. Everybody, with the exception of mainstream environmentalists, agrees that now is not the time to phase out coal-fired electricity generation in the U.S (the biggest contributor to air emissions). In light of this, Luntz’s communication acrobatics were essentially a rearguard action, to deflect or dampen criticism of Bush’s reluctance to impose emission restrictions on electric power companies.

(The crazy behaviour of the price of gas is also exactly why the McGuinty Liberals have put off closing Ontario’s coal-fired generating plants and recommitted to nuclear energy. More about this later.)

So Bush has received a tacit and highly qualified pass on the issue of air emissions. However, the emergence of strong state-level initiatives like the RGGI and California’s recently announced emission reduction plan show that the American public is demanding action on the environment.

The Canadian public is similar to the American in this regard. Which means there had better be meaningful emission reductions in Canada—and soon. Rhetorical re-frames work better when they’re based on something more substantial than hot air. Bush had good structural economic reasons for refusing to regulate electric power emissions. Moreover, he has made up for that by providing significant financial support for a new wave of nuclear build in the U.S. power industry.

For the Canadian Conservatives, trying to shift emphasis to air pollution will just confuse people and expose the Conservatives to claims of ineffectiveness (see my October 12 post). So there really is no alternative to just reducing emissions.

And how can we achieve emission reductions in Canada? The first wave of reductions is already underway, in the Ontario electricity sector. So far, nobody has noticed. But they will. Stay tuned.

Monday, October 16, 2006

Harper’s made-in-Canada Kyoto plan and the Ottawa mayor’s race
I have been arguing in these posts that a fundamental shift away from fossil fuel use and toward low–emission intensity electricity should be an integral part of Canada’s emission reduction strategy. This is easily doable, especially in the transportation sector, where electric powered vehicles are truly the wave of the future.

In fact, the shift is already underway and has been for some time. Toronto’s electric-powered subways and streetcars have carried untold millions of passengers for decades. Toronto’s air is clogged from the exhaust of fossil-fueled motor vehicles—imagine how much worse it would be if the city’s subways and streetcars were diesel-powered.

In view of this, the City of Ottawa’s plan to build an electric light-rail artery into downtown is not just smart growth. It also embodies a visionary and practical approach to reducing transportation emissions. The electric power that will propel this train—if the project becomes a reality—will by the time the train begins running be more than three-quarters emission free (provided Ontario, the jurisdiction that provides power to Ottawa, indeed rehabilitates or replaces its currently laid up nuclear capacity).

When hybrid electric vehicles become widespread (as experts predict they will), I can see city by-laws requiring drivers to operate vehicles on electric power within city limits. Combined with electrified mass transit, transportation emissions will drop like a stone.

There are four short weeks to go before the Ottawa municipal elections, and things are already getting tense. The single biggest issue is the electric light rail plan. Only one candidate, Mayor Bob Chiarelli, supports it. Federal treasury board president John Baird, whose government promised $200 million for transit in Ottawa, now wants a new review of the plan before he forks over the cash. Regardless of the partisan politics at play here, electrified mass transit must be part of any plan to reduce emissions. The Harper government should ultimately support Ottawa’s electric light rail plan.

In the mean time, let’s hope the voters of Ottawa choose it. Their children and grandchildren will thank them for it.

Thursday, October 12, 2006

Clean air or greenhouse gases: part II
Canadian industries burning fossil fuel produced over 368 million tonnes of emissions in 2003 (see Environment Canada’s 2003 Emission Summaries). Almost all of these emissions consisted of carbon dioxide (CO2), the main greenhouse gas. The remainder included what we call air pollution: substances such as oxides of nitrogen and sulphur, volatile organic compounds, carbon monoxide, and particulate matter.

The Conservatives indicate that their made-in-Canada plan will focus on the latter substances.

Focusing exclusively on reducing air pollution from industrial fossil fuel combustion means using emission-control devices such as SCRs (for nitrogen), FGDs (for sulphur), and airbags or electrostatic precipitators (for particulate matter).

The trouble is, it doesn’t matter how effective these measures are. As I mentioned above, combustion emissions are mostly CO2, which is the main greenhouse gas. So even if Harper launched pollution-reduction programs that were totally successful and that resulted in major reductions (which is extremely unlikely), critics would point to the still-huge CO2 emissions and say the government has only reduced a small fraction of total emissions. Such rhetoric would be highly misleading, but not incorrect. And I guarantee that Harper’s critics in the environmental movement will not hesitate to attack him on this basis.

This is a no-win scenario. The Conservatives shouldn’t go down this road. Instead they have to reframe their approach. It is true that very few people understand the difference between GHGs and air pollution anyway; therefore, all the more reason to pursue policy that achieves the bigger reductions. The Conservatives have to bite the bullet. They have to reduce GHGs.

As I have suggested, hard emission reductions are indeed possible in the power-generating sector (which in 2003 was responsible for nearly two-fifths of the 368 million tonnes from industry). This requires shifting more capacity to low- or non-emitting generation fuels.

Ontario is already in the process of doing exactly this, with the plans to rebuild or replace ageing CANDU generating reactors. The federal Conservatives should support this.

Tuesday, October 10, 2006

Clean air or greenhouse gases: where should Canada focus?
The federal Conservatives are, presumably, putting the final touches on their made-in-Canada “air” plan. It will be interesting to see what it contains. The Conservatives have indicated they want to focus on air pollution rather than greenhouse gases (GHGs)—better, they have suggested, to reduce the substances that directly harm humans.

This is laudable, but the difference between air pollution and carbon dioxide, the principal GHG, is in large part a false distinction.

Why? Because the overwhelming bulk of the emissions from industrial smokestacks and car tailpipes is carbon dioxide (CO2). Actual air pollutants, such as oxides of nitrogen and sulphur, are less than half of one percent of total emissions.

It is possible to reduce only air pollutants, while leaving CO2 untouched. Devices such as selective catalytic reducers (SCRs), which reduce nitrogen, and scrubbers, which remove sulphur, are in use in hundreds of coal-fired power plants around the world. All cars manufactured on this continent have catalytic converters, which remove nitrogen, carbon monoxide, and volatile organic compounds from exhaust emissions.

To take only industrial air pollution, focusing exclusively on air pollution means installing SCRs and scrubbers on many more fossil-fired generating units. This will cost billions (outfitting nine Ontario units, for example, would cost $3.5 billion). In the end, we will have reduced air pollution but will have left CO2 untouched.

On the other hand, addressing fossil emissions by simply using less fossil fuels accomplishes a dual goal: it reduces emissions of both CO2 and air pollution. In the power generating sector, the best way to use less fossil fuel is to shift more generation to low- or zero-emission sources.

I have suggested in previous posts that Ontario’s power generation sector is well-placed to accelerate exactly this kind of shift. Indeed, the current provincial government plans to at least maintain the proportion of nuclear power that feeds the grid. (Ontario’s electricity is already 75 percent emission-free, and nuclear is the main reason for that.)

If Dalton McGuinty’s Liberals were to increase nuclear’s proportion to sixty percent, they could displace enough coal-fired power to reduce emissions by some 20 million tonnes per year. Those 20 million tonnes are mostly CO2, but they also include nitrogen and sulphur oxides. Therefore, shifting more generation to nuclear achieves air pollution reductions as well.

The federal Conservatives should support Ontario’s move. But that’s easy for me to say. There are partisan considerations, as I mentioned in my October 4 post. However, basic political survival could trump ideology. Stephen Harper’s Conservatives will soon find out how their made-in-Canada answer to Kyoto flies in Quebec. If it flops, they will have to adjust it.

I might get my way yet.

Thursday, October 05, 2006

P-Rod bangs out huge double for federal Liberals
You know that fall has truly arrived when the “Rods” pick up their games. Baseball fans are enjoying the matchup between the Yankees’ A-Rod (Alex Rodgriguez) and the Tigers’ I-Rod (Ivan Rodriguez) in the ALDS. And politics fans in Canada are enjoying the House exploits of the federal Liberals’ P-Rod (Pablo Rodriguez, MP from Honoré-Mercier).

Since the last Parliamentary session, I have been harping about the real possibility of a Kyoto-driven gambit by the opposition. Well, yesterday it happened.

P-Rod finally got a vote in the House of Commons on his private member’s bill calling for the government to honour Canada’s Kyoto commitment. It passed. The Conservatives had to vote against it, which opened them to criticisms from every green group in the country. Now Rodriguez’s bill is going to the ENVI committee. The House vote put P-Rod on second base, to use a baseball metaphor. A committee vote could give him the opportunity to steal home, and cause some serious damage.

Now the question is: could P-Rod’s big double put the opposition in striking distance of a non-confidence vote?

“Pablo, come to Florida.” The Conservatives wish he’d just go.

Wednesday, October 04, 2006

Electricity as an Ontario (and a Canadian) election issue
I mentioned in my October 3 post that the Ontario Liberals’ loss in Parkdale–High Park occurred for reasons other than their nuclear expansion policy. This is not to say electricity won’t be an issue in the provincial election in October 2007. It will.

With all the talk of Kyoto and climate change these days, together with the fact that it will cost billions to rehab and build reactors—and Ontario’s past experiences with fission—it can’t not be an issue.

The really interesting thing is, what role will the federal government play in Ontario’s nuclear plans? There will likely have been a federal election by the time Ontario’s election rolls around next October. Let’s say Harper wins again. Will he extend any help to Dalton McGuinty? As I have mentioned in the “Harper’s Kyoto dilemma” series (see Archives from June and July), such a move, if skillfully packaged, could solve Harper’s Quebec–Kyoto problem.

But if Harper were to follow my advice, he could not prevent the McGuinty Liberals from also capitalizing politically. If he supported their nuclear expansion plan in the name of Kyoto, then he could not take sole credit; he’d have to share it with McGuinty. Ditto for McGuinty: if he touts his nuclear plans as green (which they are), and demanded federal support, and got it, he could not prevent Harper from benefiting.

Where does this leave the Ontario Conservatives? Remember that three prominent members of Harper’s cabinet—finance minister Jim Flaherty, health minister Tony Clement, and treasury board president John Baird—were cabinet ministers in the Harris and Eaves governments. All have close ties, if not to John Tory himself (Flaherty, backed by Baird, ran against Tory for the leadership of the Ontario Conservatives in 2004), then to their former colleagues at Queen’s Park.

So the next question is, would Harper and his Ontario cabinet ministers hand Dalton McGuinty’s Liberals an election victory at the expense of the Ontario Conservatives if it meant extending the federal Conservatives’ stay in power?

This might be why neither McGuinty nor Harper has said much about nuclear power. The rubber hasn’t hit the road yet.

But it will. A federal election will happen soon, and McGuinty has less than a year before he hits the hustings.

Tuesday, October 03, 2006

Why isn’t the Ontario nuclear restart a bona fide green move?

In 1994, greenhouse gas (GHG) emissions from Ontario’s electricity generating sector were nine million tonnes below Kyoto compliant. Of course Kyoto hadn’t been signed yet in 1994 but that’s not the point. The nine million tonnes is what’s important: it means Ontario’s GHGs from electricity generation were more than 26 million tonnes less in 1994 than they were in 2003.

And it’s also crucially important to remember how in the world Ontario ever found itself below the eventual Kyoto target in the first place.

Nuclear is sixty percent of the explanation, and hydro is twenty-five. Ontario generation was eighty-five percent emission free in 1994–1995; today it’s about seventy-five percent; see Environment Canada’s GHG inventory. In 1994, electricity-related emissions were 16.5 million tonnes (Kyoto would require the province to reduce annual emissions to roughly 25 million tonnes: six percent below the 1990 level of 26.4 million tonnes.)

Ontario’s CANDU fleet began encountering “maintenance issues.” So, in 1995, Ontario began laying up reactors: eight in all. Deprived of nearly half its nuclear power, the province was forced to rely on its coal-fired backup generators. Emissions skyrocketed.

Here we are today, twelve years and two governments later, and the current provincial government has decided to refurbish or replace the laid up reactors. We’re headed to Kyoto compliance once again. Given the sheer size of the reductions that will bring us to that point, this is a major positive development.

So where’s the applause? In light of the Environment Commissioner’s report last week, which slammed the federal Liberals for inaction in the nine years since they signed Kyoto, you might think McGuinty’s nuclear move would have been trumpeted by someone, not least McGuinty himself, as the biggest step—by far—that any government has taken toward Kyoto.

To be fair, McGuinty is beginning to talk about it… sort of. Keith Leslie of the Canadian Press quotes the premier as saying “we’re going to build new nukes in Ontario, not because it’s without controversy, but because it’s the right thing to do.”

This sounds a bit defensive. Is McGuinty afraid of the anti-nuke crowd’s political clout? Possibly: he worked hard to get Sylvia Watson elected in Parkdale–High Park two weeks ago, only to be defeated by an NDP candidate supported by the ant-nukes. Among others, these included the Ontario Clean Air Alliance, World Wildlife Fund, Greenpeace, and the Sierra Club. These groups promised a repeat in next year’s provincial general election.

But 2006 isn’t 1812 and Toronto isn’t Detroit. McGuinty doesn’t have to repeat General Hull’s mistake. The anti-nuke crowd is noisy, dedicated, and full of threat and bluster. But it’s not an electoral threat. The NDP, alone among major Ontario political parties in opposing the nuclear renaissance, hasn’t budged from third place in spite of two Toronto-area by-election victories. The Liberals lost Parkdale–High Park for reasons other than their nuclear policy.

This means McGuinty still has time to get out in front of the nuclear issue. He came to power promising to give Ontario clean air by closing the coal plants. If he cuts their emissions by more than half, that’s almost as good.