CANADIAN INSTITUTE FOR RADIATION SAFETY
WEST HILL COMMUNITY ASSOCIATION
CANADIAN WIND ENERGY ASSOCIATION
CANADIAN ENERGY EFFICIENCY ALLIANCE
CONTENTS
Monday 3 November 1997
Northland Power
Mr Jim Temerty
Mr Fred Brown
Greenpeace
Mr Kevin Jardine
Canadian Institute for Radiation Safety
Dr Fergal Nolan
Environmental Probe
Tony O'Donohue
West Hill Community Association
Mr Clem Okonkwo
Canadian Wind Energy Association
Mr Jim Salmon
Heat, Steam and Power Inc
Mr Patrick Gillette
Mr P.D. O'Brien
Canadian Energy Efficiency Alliance
Mr Bruce Lourie
EPV Canada Consultancies
Mr Laszlo Jarmai
SAC International
Dr Ahmad Solomah
TransAlta
Mr Steve Hodgkinson
Mr Barry Chuddy
SELECT COMMITTEE ON ONTARIO HYDRO NUCLEAR AFFAIRS
Chair / Président
Mr Derwyn Shea (High Park-Swansea PC)
Vice-Chair / Vice-Président
Mr Monte Kwinter (Wilson Heights L)
Mr Sean Conway (Renfrew North / -Nord L)
Mrs Barbara Fisher (Bruce PC)
Mr Doug Galt (Northumberland PC)
Mrs Helen Johns (Huron PC)
Mr Monte Kwinter (Wilson Heights L)
Mr Floyd Laughren (Nickel Belt ND)
Mr John R. O'Toole (Durham East / -Est PC)
Mr Derwyn Shea (High Park-Swansea PC)
Clerk / Greffière
Ms Donna Bryce
Staff / Personnel
Ms Anne Marzalik and Mr Lewis Yeager, research officers, Legislative Research Service
Mr Richard Campbell, consultant
Mr Robert Power, legal counsel
The Chair (Mr Derwyn Shea): The committee will be in session as we start now, on the third day of November, public deputations. You can see we have a number of deputants to take us through most of the day. There are a couple of spots where deputants have just called in to indicate they are unable to be with us. What I propose to do, as we get to the end of the day, is to take an hour and we'll go into closed session and begin to discuss issues such as the writing of the report and so forth and do some of the business today that we might otherwise have to do in subcommittee.
Mr Monte Kwinter (Wilson Heights): Are you going to be able to move everybody up?
The Chair: We're trying to collapse as much as we can, Mr Kwinter, so we can expedite the matter. We've done what we can. There are a couple of spots, but not many. I think we've been able to get reasonable efficiencies.
What I'd also like to do is indicate, for the purpose of Hansard, that there is some measure of pride today. Our legal counsel, Mr Power, was able to complete the New York City marathon on the weekend and has in fact received this medallion presented to him by the Yellow Cab Co.
Applause.
The Chair: I think a round of applause is appropriate. He claims he came 22,000th out of 21,000, so we obviously wish him well. He used up the cab chits all the way through it. We're very proud of you. He did that with no training whatsoever, and so let the Americans be terrorized by the future potential of the Canadian challenge. Imagine what would happen if we actually trained.
Mr Robert Power: I just can't imagine.
The Chair: You might not even make it. There you go, Rob. Congratulations. Wear that with pride; we're proud of you. I trust the legal clock wasn't running while you were running.
Let's continue here now. So we're clear what we're going to be doing, we will do the business of the committee in camera at the end of the day. That will allow us to truncate some of the activities that would normally be required for another date and another time for the subcommittee.
NORTHLAND POWER
The Chair: We begin with our first deputants. We have 20 minutes in most cases. Our first deputation is Northland Power. For the purposes of Hansard, would you be good enough to identify yourself and your colleagues at the witness table, please.
Mr Jim Temerty: Thank you, Mr Chairman and members of the committee, for this opportunity to make our brief presentation and answer your questions. I'm Jim Temerty, president of Northland Power. I have with me Fred Brown, our executive vice-president responsible for operations, and Paul Vyrostko, who is vice-president of development. Some of you may know Paul. Paul was formerly with Ontario Hydro, where he was the executive responsible for non-utility generation. He's been with us for the last couple of years.
I will take a few moments to make some introductory comments, but before that I thought I would let you know how our presentation will go. After my short introductory remarks, I'll be turning it over to Fred Brown, who will be speaking to our view of the risks and rewards ahead for Ontario as Ontario grapples with energy issues. We'll be speaking to what the independent power industry can do and we'll be speaking to what our vision is. We'll be answering the question as to what is required for the independent sector to move forward with the opportunity that's ahead of us.
Briefly, by way of introduction, Northland Power is an Ontario company. It was established 10 years ago as a company that designs, builds, owns and operates power projects. We're happy to say that we're the largest independent power producer in the province of Ontario, with 250 megawatts in operation. Some people will remember that about six years ago we had 750 megawatts under contract with Ontario Hydro, but with the then surplus in energy generation in the province, that was cut back to 250 megawatts and we left 500 megawatts on the table. Those 500 megawatts would have been sorely needed today.
We're also an international player. We have a significant presence in Ukraine, where we are 51% owners of a district heat and power project in the city of Kiev, which project supplies the city with a lot of its electricity and a great deal of its district heat. That plant has the capability after modernization to generate 300 megawatts of electricity and 600 megawatts of thermal power.
With that brief introduction, I'll turn it over to our operating executive to speak about the risks and visions and opportunities as we see them in Ontario.
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Mr Fred Brown: First I'd like to state what may be obvious to many of you, but for those of you who aren't familiar with the independent power sector, the key benefits are also major risk mitigation strategies. Obviously, if it had been independent power, you would not be struggling with the current struggles that you're considering today. The debt obligation, the billions of dollars, would be carried by the private sector, not by the government. The myriad of risks that are associated with power -- cost overruns; the issue of completing on time, which ultimately becomes also a cost factor; the performance or the capacity factors in the plant; and ultimately the kind of issues you're struggling with right now, the maintenance costs and implications -- are all borne by the private sector in independent power.
A key facet of independent power is that not necessarily, but more often than not, it involves cogeneration. What cogeneration ultimately means is efficient use of the fuel and a lower overall energy cost. By that I mean in most of the installations both electricity and the heat associated with it.
To that end, we are working with many potential users of cogeneration in the province where they would see a direct benefit in lowering their overall energy costs. Our last project at Iroquois Falls saw several millions of dollars saved by the Abitibi mill there on their heating costs, because that came as a byproduct of producing the power.
We use primarily natural gas, but in other cases wood waste. The environmental impacts of our plants are as good as they get, natural gas being as clean a fuel source as you can use today.
We do not see ourselves as in any way replacing Ontario Hydro but rather being part of an energy portfolio that allows for a diversity of supply fitting where it should fit and providing economic benefits to the province.
The question you're no doubt asking is, given today's circumstances, what can independent power do immediately and what can it do over the medium term and the longer term? Our guesstimate of what's available today in terms of the plants that are in operation today is somewhere in the order of 100 megawatts now of surplus power. In our own case, our Iroquois Falls plant has between 10 and 20 megawatts of surplus power that could be made available instantly. Then there's a category of minor upgrades to the plants. We see that as another 100 to 200 that can be brought into play very quickly, six to nine or 10 months. We can bring extra power in play with a little more lead time in our existing plants. For example, in Iroquois Falls we could bring in another gas turbine, another heat recovery system, and within about 18 months we could be providing another 50 megawatts in that installation.
When it comes to new plants, the sky's the limit in terms of the capacity of additional power that can be brought on. It can be brought on in about 24 to 36 months, depending on the circumstances.
No doubt you're asking the question, what's the cost of this incremental power? As always, it's a more complicated question than a simple net answer, but let me frame it for you. If you have the perfect cogen application where it's a balanced load between electricity and power, that is the least expensive option and you can get power for about 3.5 cents a kilowatt in Ontario. If it's an inefficient mix and blend, it could go in the order of 5.5 cents. It really depends on how much you're able to take advantage of that ability to produce two sources of energy from the single fuel, which is cogeneration.
Our view of the future and the vision of where the power sector is going or should go is to distribute it -- by that I mean power generation -- close to the user: clean, efficient and low-cost energy, and total energy, meaning you get all the benefits of the electricity and the heat or whatever the requirement is for that thermal energy that's a byproduct and use that as efficiently as you can.
If you read the press, they talk in terms of hydrogen fuel cells as being the ultimate fuel source or energy source for all of us in our homes. That's going to take a few years to unfold. The question is, what do we do between now and then and how we do proceed?
We believe the government should encourage the pursuing of local opportunities today, not a few years from now but today, to maximize that potential. We think you need to develop a balanced mix of cogeneration at the local level and the Ontario Hydro offerings. Cogeneration, if it was started today in a big way, would not become anything like the dominant source of power in the province but would certainly be a dominant contributor to the incremental power needs of the province. To do that, we think we need forms of competition and open access. I'd like to talk a little further about what we think is required in order to pursue that opportunity.
Essentially we think the IPP or independent sector needs to be unshackled. First of all, we need the direction clarified. We suspect the white paper will do that. We think the current obstacles to pursuing cogeneration in an aggressive fashion, where industry needs it for competitive reasons and cost-structure reasons, need to be removed.
We think the load retention strategy of Ontario Hydro and load retention rates should be discontinued. The most recent example was in August when the board met to approve the $8-billion investment. They also approved, we understand, a load retention rate for Shell Oil in Sarnia, which seems illogical and inconsistent to us.
In order to do this in the most efficient way for the province, there needs to be the ability to have backup power rates that are fair and/or wheeling rates where other sources of backup power can be realized for those that are pursuing cogeneration. We think there needs to be legislative support ensuring that Ontario Hydro will cooperate with this direction.
Finally, in this environment we need stability in order that the financing and investment decisions can be made. It's no different than a country that's looking to attract investment into a sector. They need stability and predictability.
With those things available to us, we believe the independent sector can rise to the occasion and address the short-term power needs in the province, which we understand can range from 1,000 to maybe as many as 4,000 megawatts in the next few years. But most important, if we don't move today to pursue that, it won't be there in the year 2000 and we'll end up perpetuating the current circumstances that we're in.
The Chair: Thank you very much. There being about three minutes per caucus, we'll begin with Mr Laughren today.
Mr Floyd Laughren (Nickel Belt): I appreciated your presentation. Was it a matter of oversight, deliberation or convenience that you made no reference to the debt of Ontario Hydro and the responsibility of people who now plug into the system?
Mr Temerty: No, it's not oversight. In fact, we considered this morning whether we should speak to that or whether we should take a question on that. We debated and decided that it might not be for us to speak to that, but we were prepared to answer the question when it came. If you have a question on that, I'd be happy to tell you our view.
Mr Laughren: I sure do.
Mr Temerty: I think you heard my reaction when we met privately in your offices. My quick reaction was that everyone should participate in the burden of the stranded costs. I repeated that to my colleagues since then several times, including this morning. But life isn't that simple and my colleagues deliberated some and I'm persuaded that it's a bit more complex and that consideration should be given to the impacts of spreading that burden right across the board evenly versus perhaps some kind of approach that would consider the competitiveness of our industry. Industry, after all, is a friend to the community.
Philosophically, I am for. We all got into this problem together. I think you know that. But at the same time, I'm also for making sure industry can compete with jurisdictions that are neighbouring to our own. The solution might lie in some kind of approach that says, "Okay, everybody carries the burden, but perhaps this sector carries it somewhat less, or at a discount."
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Mr Laughren: A very short question and I think an easy answer: If you were producing power using gas, without any cogen component, what would be the price, the cost?
Mr Temerty: It would depend on the size of the power. We did that calculation in preparation for this afternoon. You can do a combined cycle plant today without cogeneration at perhaps a premium of about half a cent, if I remember, to no more than a cent against a realistic cogeneration environment. Combined cycle is changing every year. Technologies are improving and you can now get efficiencies, in per cent, in the low 50s, meaning you can extract energy from that gas and turn it into electricity at a rate of about 51%, 52% and even higher. Ontario Hydro operates its plants at about 30% to 34%, so you get amazing efficiencies.
Cogeneration is the best way to go, but people dream about perfect cogeneration where there's perfect balance and you never get the perfect balance realistically. The penalty for combined cycle versus cogeneration, the right size of combined cycle, which would be about 250 to 300 megawatts, that size, not much larger and not a heck of a lot smaller, is not a very big penalty.
Mr Doug Galt (Northumberland): Good afternoon. I am just curious as to how you see your organization and what you can do in this nuclear recovery program. How can you plug in? How can you be helpful in this particular aspect?
Mr Temerty: I'm glad you asked that question. This is a big problem for the province, but we needn't be downbeat about it. We can be upbeat about it in that it's also a huge industrial opportunity. There is a feeding frenzy of private sector power development happening all over the planet. Our strategy 10 years ago was to establish ourselves in the province, build a critical mass and then go out and market the province's capabilities around the world.
We were at one point 750 megawatts contracted. We got pushed back to 250 megawatts because of the history you know. We're ready to build those 500 megawatts that we were pushed off of and build significantly more than that. I know my colleagues in the industry would say that the independent power industry, in terms of its capabilities, is unlimited in its ability to produce cost-effective, clean power very quickly.
Mr Galt: You're talking about cogeneration and your involvement. Should private industry be involved with all kinds of production of electricity, whether it be hydraulic, nuclear or fossil fuel? Do you see private enterprise involved in all of them? A lot of people in Ontario are very nervous about nuclear plants being privatized and that's really what I am coming around to.
Mr Temerty: Yes. If I had the opportunity, I wouldn't do nuclear, but that's a philosophical thing. I notice that around the world there are plenty of jurisdictions where the private sector is doing nuclear and is doing it very well. Nuclear aside, certainly our company would be happy to engage in any mix of energy generation opportunities. I think there ought to be a mix, including wind power and solar panel and fuel cell kind of stuff, just to keep us moving along with the technology as it unfolds.
Mr Kwinter: Mr Temerty, in your requirements you list dependability, accountability and predictability in the electricity marketplace. What does that mean to the IPP?
Mr Brown: Fundamentally, raising financing requires that you can give a confident, predictable stream of revenue. In the current state we're in, where we don't know what's going to happen, we're in a state of flux, so raising the financing is that much more difficult.
If the province wants power on stream in two years, we have to start today and we have to have the ability to forecast a revenue stream that we can take to a banker and get him to loan us some money on. In the current state we don't know what the power rates are going to be. We need some security to be able to raise that financing, whatever portion of it is the debt component of the project. In days gone by, that was a high component. In the future it'll be less, a much higher equity component, but you still have to raise that money from the banks.
Mr Kwinter: The reason I'm asking is, I'm trying to determine whether the IPP is in a position that they either will not be able to provide the energy unless they get fixed-rate contracts, or are they in a position to build a merchant plant and then go out and see where they can get their customers?
Mr Brown: Our view of the merchant plant is it's a figment of some people's imagination and some creative story-telling. Behind almost every one of the merchant plants that anybody calls a merchant plant is a very strong base of revenue projections that are supportable to the financial community. So it's not all at-risk capital the way some people would interpret it to be.
Our view would be that in an unstable environment where you can't assure the investment community of what's going to happen, you can't count on getting the financing, and if you can't count on getting the financing, the projects won't go forward.
There are many players who will come in and tell you, "We'll do it." They'll tell you what you want to hear. But the common sense of it is, nobody is going to build a $100-million, a several hundred millions of dollars project without being able to raise financing from the markets. To do that, you have to have some security and confidence around your financial projections.
The Chair: Thank you, Mr Kwinter. Gentlemen, just before you're excused, a response, if you wouldn't mind, to two questions. In your presentation, you've indicated you have access immediately to about 100 megawatts.
Mr Brown: That was our assessment approximately, a guesstimate of what the private sector has today. In our own case we can speak to one plant that has, depending on the time of year, 20 megawatts. In another project, which we would quickly expand to add another 40 megawatts, we could add another power train to one of the projects for another 50 megawatts. Those are the size and numbers.
The Chair: The key question I want to get at is, in terms of that excess, wherever it may be found at this point, can you indicate what you think your estimate would lead us to believe in terms of cost per kilowatt hour compared to the access to US availability?
Mr Brown: The answer is, in short, it depends on the price of natural gas. Currently, if we buy gas in the market today for this winter's usage, we have to pay a premium because we do not have long-term transportation. That premium is somewhere in the order of one and a half to two cents a kilowatt.
At this point in time we would need five and a half cents to do winter power, which is what we responded to the RFP that was closed last week. However, with some lead time to organize transportation, with some predictability behind it, those costs would be a lot lower. Our view in the summer is that the rates would be substantially lower by about a cent and a half.
The Chair: And maybe competitive.
Mr Brown: Against the US markets we believe those rates will be competitive, depending on the surplus situation. Our sense is the surpluses in the northeast do not exist this winter and therefore there's probably more rate pressure than people have been used to thinking about.
The Chair: All right. As you take us beyond the immediate horizon into the next step where you're indicating, "Look, with immediate answers one can start to build and go through the financial arrangements," and so forth, what is your business plan indicating in terms of contracts required to make this a doable deed?
Mr Brown: We're dealing with a number of industrials and talking to some of the municipal distributors of power. What we need is the ability to write contracts, to be able to provide the energy to them. At the moment we're not allowed to do more than deal with one customer behind his fence.
The Chair: But are you talking two years, five years? In other words, you've done --
Mr Brown: If we had the clearances and there was a predictable field in front of us, we could respond and have power up in two years.
The Chair: What would be the term of contract you would also require to be able to --
Mr Brown: We would enter into a longer-term contract with those people. It would probably be a partnership arrangement with them, depending on their needs. We would contract into the spot markets as they emerge for a portion of the power.
Mr Temerty: But to try to answer the Chairman's question on the term, I can't imagine it much less than 10 years. We would be trying to go certainly as long as 15 years. We're used to 20-year and we have even 40-year contracts, but the world has changed and I think we'd be looking at something closer to 10 now and trying to maybe do a little north of that.
The Chair: Thank you very much for your answer and thank you very much for your evidence. We appreciate that very much. Any further information I hope you'll be able to provide in writing if necessary. We thank you for attending upon the committee.
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GREENPEACE
The Chair: We turn our attention to the next deputant, a 20-minute presentation by Greenpeace -- 20 minutes either for presentation and/or for questions -- with Kevin Jardine.
Mr Kevin Jardine: Good afternoon. I'd like to express my appreciation on behalf of Greenpeace for the ability to speak here today.
Greenpeace is the largest environmental organization in Canada. We have about 200,000 supporters, including about 55,000 or so in Ontario. We have a campaign in Canada that focuses on atmosphere and energy issues and in the past we very much have worked on nuclear power. In fact, internationally, Greenpeace's nuclear power campaign began at the Bruce nuclear generating station in 1979. We continue to work on energy issues currently more from an air pollution angle.
I'd like to draw your attention to the one-page summary of my presentation. I'm going to base my comments on that. I've got more information available here which I can refer to during the question period. I'd like to base my presentation primarily on looking at the environmental impacts of the implications of switching from nuclear to coal and oil. Of course there will be other presenters who will be talking about the nuclear issue and certainly a number who are talking about alternatives. I will deal with both of those issues as well, but predominantly my presentation will be on the coal and oil plants.
In 1996 Hydro generated about 20 terawatt-hours in electricity from its five operating coal-fired power stations and one oil-fired station. This resulted, according to Ontario Hydro's figures, in the release of 33,000 tonnes of smog-producing nitrogen oxides, 85,000 tonnes of the acid gas sulphur dioxide and more than 18 million tonnes of the greenhouse gas carbon dioxide.
Ontario Hydro has already publicly stated that it expects to increase fossil generation in 1998 by about 16 terawatt-hours over 1996, to about 36 terawatt-hours. Calculations suggest this will add more than 14 million tonnes of carbon dioxide, for a total of 33 million tonnes, and equivalent increases in nitrogen oxide and sulphur dioxide.
All of these numbers are a little bit mind-boggling, so what I've done is I've reduced it to the number of cars, which is a little easier to understand. The implications of Hydro switching from nuclear plants to coal and oil plants is equivalent to doubling the number of cars in Ontario for carbon dioxide or adding about a million new cars to the road for smog-producing nitrogen oxides. So we're talking about a substantial increase in air pollution.
The resulting emissions in 1998 would violate Ontario Hydro's voluntary carbon dioxide limit by 25%. As you'll see in the attached spreadsheet, Ontario Hydro actually made a commitment to keep its carbon dioxide emissions below 26 million tonnes. In fact, in 1998 it's emissions will rise, as I mentioned, to about 33 million tonnes.
Moreover, it has a voluntary nitrogen oxide limit which is also in here -- I think it's 38,000 tonnes -- and it would exceed that by 57%. Moreover, it would bring Ontario Hydro within 2% of violating its mandatory acid gas cap. That's under air pollution regulation 355, section 2.
I've just mentioned the implications of what Ontario Hydro has already announced. In fact replacing the 4,376 megawatts generated by the seven nuclear reactors would ultimately require 31 terawatt-hours of fossil supply, not the 16 terawatt-hours seen so far. Ontario Hydro simply wasn't using all their nuclear capability, but it is of course projecting increases in the future. Again the figures are attached, but in human terms, replacing these seven reactors with a fossil mix similar to Ontario Hydro's existing supply would be equivalent to tripling the number of cars in Ontario. It would be adding about nine million cars on the road in Ontario or adding about two million cars to the road in terms of nitrogen oxides.
There are a number of reasons to be concerned about this. First of all, the increase in carbon dioxide would contribute to Canada's violation of its agreement in the Framework Convention on Climate Change. Canada committed at the Earth Summit in Rio to reducing its greenhouse gas emissions back down to 1990 levels by the year 2000. In fact, somewhere between an 8% and 13% increase is now projected.
Canada is about to go into the largest, most important environmental conference since Rio in Kyoto, Japan. We will be going there with our tail between our collective legs. We made a commitment back at the Earth Summit that we would stabilize our emissions, and because of companies and corporations like Ontario Hydro, we are failing to do that.
In the end there will be severe effects if the world is not able to agree to reducing greenhouse gas emissions, and they will especially have effects in Canada, as a northern country. This isn't the time to go into any of those impacts in detail, but they will include the melting of the polar ice caps, massive forest fires and the spread of diseases like lime tick disease and malaria into Canada.
Moreover, the increase in NOx -- nitrogen oxides -- will contribute to smog, which is a major threat to human health. Environment Minister Norm Sterling estimates that about 1,800 people a year die early deaths from smog alone in Ontario. As I mentioned, combined with the increased sulphur dioxide emissions, it will threaten to violate Ontario Hydro's mandatory acid rain agreement.
I don't want to sound like I'm saying: "Okay, shutting down the nuclear plants is a horrible thing. They shouldn't be shut down." That's certainly the point of view other people are expressing. Greenpeace thinks Ontario Hydro is obsessed with nuclear power and coal. What we are hearing again and again from Ontario Hydro is that there are no choices, that we either have to have massively polluting coal and oil plants or extremely dangerous, unreliable and very expensive nuclear plants. Unfortunately, we're hearing more of the same from Bill Farlinger. In the Globe and Mail this morning he said, "We have to fix the nuclear plants or it's going to be cold and dark in Ontario." It sounds as though Mr Farlinger has joined the nuclear cult he was so critical of.
What I have done is attach in your material some excerpts from a report which we released a couple of weeks ago, written by Brian Kelly, who is the former head of the green power program at Ontario Hydro. It's called Ontario Hydro's Green Power Program -- Requiem or Rebirth? You're welcome to read the executive summary. If people want copies of the full report, I have it here. I just didn't want to make 25 copies of it.
I want to draw your attention to a couple of points in that report. First of all, by January 1997, Ontario Hydro had received 27 fully developed proposals for non-polluting energy sources, of which 23 are still viable according to their proponents. That's enough to power the homes in a city the size of Kitchener-Waterloo. The viable proposals add up to 157 megawatts. That's very small. Nevertheless, if Ontario Hydro were to go ahead with those programs, which are already fully developed and ready to go within the next year or so, that would help to kickstart the renewable energy industry in Ontario.
Also, many of these proposals are wind projects on the Bruce Peninsula, so it would help to create jobs in an area which is very much going to be hit by the shutdown of the nuclear plants, in the longer term if not in the next few years.
Also, far more is possible. The wind industry estimates the potential for wind alone in Ontario is at least 2,000 megawatts. I understand you're going to be hearing a presentation from someone from the Canadian Wind Energy Association a little later this afternoon, so I won't go into that in a great amount of detail.
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Moreover, besides these traditional energy sources, like for example wind, there are also very underexploited renewable energy sources with costs similar to coal-fired electricity, and one very good example is landfill gas. According to Eastern Power, which operates a landfill gas facility for Metropolitan Toronto, they could put at least about 200 megawatts of new supply online, cost-competitive with coal maybe about three or four cents or so per kilowatt-hour.
I just want to conclude by again summarizing. The implications of switching to coal and oil are a massive increase in air pollution and it's not necessary to invest the huge amount of money into nuclear that Ontario Hydro is talking about. I want to stress, and probably other people have stressed as well, that the $8 billion or so that has already been put on the table does not include the cost of renovating Pickering A or Bruce A. That will be on top of that. I want to stress as well that there are other options, including some of the ones that I've mentioned.
Mrs Helen Johns (Huron): Thank you for being here today. I just have a couple of questions about your proposal. When I listen to you, you don't want nuclear energy, really, and you don't want coal. You want us to go to some of the other sources.
When we took our tour of Bruce last week, they have one windmill up there right now and they said the cost of power was approximately 10 cents per kilowatt-hour, if I remember that correctly. They told us to be able to take one reactor out of service and replace it with wind power, they'd need to put up 55,000 windmills. Do you agree with that?
Mr Jardine: I don't know the exact number of wind turbines that would be required, but each one of those wind turbines is 600 kilowatts and that plant, I don't know how many megawatts -- you're talking about Bruce A or Bruce B or combined?
Mrs Johns: I was talking about each reactor needing 55,000, so I was talking about Bruce A.
Mr Jardine: No, that's inaccurate. It would be significantly less than that.
Mrs Johns: Okay.
Mr Jardine: However, I want to stress that environmentalists aren't saying that wind is the solution or energy efficiency is the solution. It has to be a combination.
Mrs Johns: I understand that.
Mr Jardine: In fact, if we were to invest in cost-effective energy efficiency, somewhat more expensive but much cleaner renewable energy, and make up the rest with high-efficiency gas cogeneration, we could easily replace the seven reactors that are being shut down and start to phase out some of the other plants as well.
Mrs Johns: I understand that, but from the presentation we heard previously, we know that we can't do that for 18 to 24 months to get substantial -- in that 18 to 24 months, potentially, if we didn't go into coal and we chose the plan that Hydro has suggested, the only alternative then would be brownouts. I don't think that's a particularly attractive opportunity or suggestion for the people of Ontario.
I guess my next question comes with the price of the power. It's my understanding that price of power coming out of Hydro nuclear, let's say, is about 3.5. Wind, and I know you're recommending more than wind but it's just the one I happen to know off the top of my head, is about 10 cents. From that standpoint, do you think the people of Ontario are prepared to pay three times as much for their household energy?
Mr Jardine: First of all I wouldn't agree with those numbers. The 10 cents is for one standalone wind turbine. The price would drop considerably if there were more built. In Quebec, for example, the price of wind, because they're going for a larger project of 100 megawatts of wind instead of one wind turbine, is coming down to about five cents or so.
I think the people of Ontario are willing to pay a little more for electricity, especially if there are programs to help them reduce their electricity consumption, in order to avoid the environmental consequences. Smog kills. Greenhouse gases have enormous effects on the environment and will have increasing effects on our children and our grandchildren.
Mrs Johns: I think we all agree with that.
Mr Jardine: We have a responsibility to act, and if we go along with the program that Ontario Hydro has outlined, the consequences will be severe.
Mrs Johns: I think we all agree that we have to minimize the emission levels. No one wants to see the environment damaged and we have to work very carefully at that, but we also have to ensure that we have reasonably priced power to attract jobs. If businesses leave Ontario, that means people don't have opportunities to work here and we lose lots of other opportunities along the line here too, so I think we have to find a balance that allows us to be able to provide an economic viability for our province at the same time as we find alternative sources of hydro-electricity.
Mr Kwinter: Mr Jardine, I appreciate your presentation dealing with the renewable energy technologies. My concern is that we have to deal with an immediate situation where seven reactors are slated to be shut down. The total nuclear facility produces about 60% of the hydro requirements of Ontario. What recommendation does Greenpeace have to deal with the immediate problem? I'd like to know your time frames for getting these wind farms into optimal operation, but what do you do in the short term? What do you do with this report that we have to comment on and how do we do it in the most economically and most ecologically viable way?
Mr Jardine: I would have three recommendations. First, the government should work closely with the Canadian Energy Efficiency Alliance to develop cost-effective energy efficiency programs that can be implemented immediately. Energy efficiency is often a matter of replacing lightbulbs and it can be done within a matter of six months to a year, so within the time frame you're talking about.
The second thing I would do is to recommend that the government work very closely with the Independent Power Producers' Society of Ontario and the Canadian Wind Energy Association, among other renewable groups, and first of all implement the 23 contracts that are still viable that Hydro has in its back pocket and then have a request for a price quotation, an RP, for at least 1,000 megawatts more. We know that is possible.
The third thing is to separate the grid from the generating system and allow more cogeneration to set up a system -- the details don't matter as much to Greenpeace -- that allows more cogeneration to come on than exists right now. Because of the fossil generation, that is by far the cleanest.
Mr Laughren: Thank you for your presentation. Do I understand you correctly that from what you know -- you may know a lot more about the nuclear stations at Bruce and Pickering than I do -- you are saying that neither Bruce A nor Pickering A -- I don't want to put words in your mouth here -- should be reopened and that other sources should be plugged in?
Mr Jardine: Yes. We're saying it's not necessary to reopen those plants and it's also not necessary for Ontario Hydro to replace them with coal and oil, that there are other options.
Mr Laughren: I understand. We were up in the Bruce Peninsula last week and met with some very, very worried people in that community because of the number of jobs associated with Bruce A, and not only that but spinoffs into the Bruce Energy Centre and so forth, which is a nice concept. What would you do, or has Greenpeace thought that one through about what you do about those jobs? There'd be an impact at Pickering A as well, but Bruce is more isolated and the impact would be greater, I think.
Mr Jardine: I think there are two things this committee and the government need to keep in mind. One is that decommissioning a nuclear plant is a long process that is quite labour-intensive. We're not talking about these plants shutting down and their staff being laid off tomorrow. The second point is the Bruce Peninsula from a wind point of view is the Saudi Arabia of Ontario. It has the best wind potential in southern Ontario. There are windier places up near James Bay, but it's too far to run power lines up there.
I would suggest that the government take advantage of the wind potential of the Bruce Peninsula and put a lot of resources into building a lot of wind turbines in that area, and that would create a lot of jobs, because constructing wind turbines is very labour-intensive.
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Mr Laughren: As far as your comment about Mr Farlinger being part of the nuclear cult, which he made comments about earlier, it wouldn't be the first time that a cult had captured somebody's mind, would it?
Mr Jardine: Unfortunately not for Ontario Hydro. It tends to be an organization that sucks people in and makes them think alike very quickly.
The Chair: Thank you. I've just been asked by one member if we can confirm some of the information and perhaps provide the committee with some additional details of the presentation, if we can do some number accounting, and we may get back to you and ask you to provide additional information.
Mr Jardine: I'd be happy to.
The Chair: My figures were showing something in the order of 6,666 windmills to pick up the shortfall at this point. At this point I think we'd be far better off to get the figures and lay them out before the committee. So we'll probably ask you for more information that Ms Johns has asked for, some more elaboration of your presentation. I'll make sure we get that tabled before the committee. Thank you very much, Mr Jardine. We appreciate the time you spent with the committee. You're excused.
CANADIAN INSTITUTE FOR RADIATION SAFETY
The Chair: May we turn our attention to Dr Fergal Nolan, the Canadian Institute for Radiation Safety. For the purpose of Hansard, if you'd be good enough, Dr Nolan, just identify yourself and your colleagues.
Dr Fergal Nolan: I will do that straight through. I pray your indulgence to read this presentation. There's an argument in it. It comes from consideration of the testimony as has been given to you over the last several weeks and there's a point we'd like to make about what emerges from that testimony.
Thank you for the invitation to appear before you. We have only a brief time, so I shall try to be succinct. First, by way of introduction, my name is Fergal Nolan. I am president of CAIRS, the Canadian Institute for Radiation Safety. Before that I was a civil servant for five years in the Ontario Ministry of Northern Affairs and before that an assistant professor at the University of Toronto.
My colleague Dr Reza Moridi is director of science and technology at CAIRS. Reza is a nuclear physicist, a chartered engineer of the United Kingdom and a fellow of the Institute of Physics. He also was a former university professor and chair of physics before he came to Canada and to CAIRS.
With us also is Tina de Geus, our information officer, a graduate of Acadia and Ryerson Polytechnic universities, who assists the hundreds of people, including journalists, who call us every year for independent information and education about radiation safety.
You have before you some information about CAIRS. You will see that the institute was founded in 1980 and began operations in 1981. The impetus for the founding of CAIRS as an independent institute for radiation safety was the calamity that befell hundreds of families in the Elliot Lake region when husbands, sons and brothers, breadwinners all, began to contract lung cancer from prolonged overexposure to radon gas in the deep, underground uranium mines of that area.
It's a sad story documented in the dry statistics of thorough epidemiological studies carried out by the Ontario Ministry of Labour. The human cost we must imagine. Many people have suffered; too many have died; more are sure to. All of them have suffered and died needlessly, all of them our fellow citizens right here in Ontario, and for what? For lack of a rigorous and unwavering commitment in the private sector and in the federal and provincial public sectors of the day to a radiation safety culture designed to protect people from overexposure to radiation from whatever source.
If we speak with some passion at CAIRS about a new and comprehensive approach that is needed to radiation safety in this province, you will understand where we are coming from. More of that anon.
As I said, the original impetus for the foundation of CAIRS was Elliot Lake. Since then, we have broadened our activities across Ontario and into other parts of Canada. Our head office is in Toronto. Our national laboratories are in Saskatoon. We receive no grants. We support our work by contracts and services. Any profits we make are put back into the institute to support our information and education role. We're a not-for-profit organization.
We promote, we inform, we teach, we train. We monitor workplaces, homes and schools. We carry out scientific studies of specific problems and provide laboratory services. We mediate with "good science in plain language" in controversies over radioactive wastes in the environment and on radiation safety issues in the workplace.
Twice we have been called upon for independent assessments of specific health and safety issues at Ontario Hydro nuclear generating stations: once at Pickering and once at Darlington.
You have before you also two single-page documents to which I would draw your attention. One is a list of the board of governors. I take great pleasure today in announcing publicly, for the first time, that the Honourable Monique Bégin accepted election as chairperson of the board of governors of CAIRS at the board's meeting in Toronto on October 23. I cannot tell you how delighted we all are at CAIRS that she has taken on this role in support of our efforts.
The other page to which I would draw your attention is our statement of principles. These are fundamental to the CAIRS way of doing things. I would be happy to answer any questions you may have about them later. First, however, to the matter at hand.
As members of the Parliament of Ontario, you have been charged with a difficult task. It's a much more serious, more urgent task than anything this province or any select committee has faced before in dealing with Ontario Hydro. You have to listen carefully, question closely, listen some more, question again and again to try to find out to the best of your abilities what actually went wrong: "Have we got the whole picture?" you will ask yourselves. "Are we missing anything?" You must judge the merits of what is brought before you. You must recommend. Above all, you hope you get it right.
On behalf of CAIRS, I'd like to say two things immediately. The first is to thank you for taking on this forbidding challenge on behalf of us all. We wish you well, most sincerely, as you carry out your work.
The second is a personal impression. Since last Thursday, when we received your invitation to appear before you, I have read nearly 400 pages of testimony, edited and unedited, published in Hansard on the Internet. I have read it closely and made many notes. My first impression, if you will permit me to say so, is that you are doing a good job. At CAIRS it's the questions that are important, not so much the answers. If we miss the important questions, we'll never get to the heart of the matter. My impression is that you're asking important and fundamental questions and you are doing it persistently. The testimony is riveting.
The next question is, how can CAIRS help you, if at all, in your task? You have two big issues before you. One is safety, which has to be your primary concern. The other is new expenditures and costs, an issue running so urgently and so closely behind safety that one is in danger of tripping over the feet of the other. It won't be easy to separate the two.
Fortunately for CAIRS, the task is somewhat easier than your own. Our concern is safety, obviously -- radiation safety, nuclear safety. Still, how can we help you on the safety question? Is there any piece of the picture that's missing?
You have read the remarkably forthright analysis and recommendations from the Andognini team and subsequent documents. You have heard Mr Andognini's crisp, confident and by any measure impressive testimony before you. You have heard from a forthright regulator in the person of Dr Agnes Bishop of the AECB, complete with full documentation. You have heard Dr Kupcis, very frank and with some insights on where things went wrong and why, that I personally had almost despaired of ever hearing from a senior figure in the nuclear energy industry. You have heard the present chairman and chief executive officer, Mr Farlinger, members of the current board of directors, at least two former presidents, Dr Kenneth Hare, Mr John Murphy and the Power Workers' Union. You have heard from Energy Probe, vigorous and long-standing critics of Ontario Hydro, and from others.
It's an impressive body of testimony. Is there anything in it with respect to radiation and nuclear safety that has not been explicitly stated? In fact, I think there is. Moreover, if I'm right, it is something deep, fundamental and systemic, something which the select committee needs to sink its teeth into.
When one looks at a body of testimony as large and as competent as you have before you, one has to try to stand back from the particulars, no matter how riveting. One looks for a pattern to emerge. To be authentic it must not be forced; it must emerge. At first it is vaguely present, a suggestion here and there. Gradually, however, it takes shape until it spreads out over the whole body of the testimony and emerges strongly.
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The pattern that emerged from the body of testimony I have been studying was unexpected. It surprised me greatly. Perhaps it should not have done so. There have been so many surprising and unexpected things in the testimony before you that I should have expected something like this.
What emerged took shape in the form of two fundamental questions:
First, on behalf of the public interest in Ontario, the people of this province, who really is in charge of nuclear safety in Ontario, including nuclear safety at Ontario Hydro? I mean really in charge, not who appears to be in charge. Is anyone actually, really, in charge? Who cracks the whip when things go wrong? Is there any whip to crack?
Second, if it emerges that no one is really in charge, what does this say about the nuclear safety culture not only at Ontario Hydro, where all attention is focused at present, but in the larger public and institutional environment in which Ontario Hydro operates and with which it interacts? Does any such nuclear safety culture actually exist in Ontario or are we being bemused by a mirage?
In response to the first question, "Is anyone really in charge of nuclear and radiation safety in Ontario?" I have to say to you that I don't think anyone is, not actually, really in command. That is what the testimony before you suggests very strongly to me. Permit me to elaborate.
For many people in Ontario and elsewhere in Canada, there is a great puzzle in the history of the present crisis at Ontario Hydro. "Why is it," people say, "that Ontario Hydro decided on its own to shut down seven reactors? Isn't the AECB supposed to be looking after nuclear safety?" How was it that a team of Americans brought in by Dr Kupcis -- kudos to our American friends, and to Dr Kupcis for bringing them in -- could look at the same set of facts that our own regulator, the AECB, says in testimony it was fully aware of and decide that the nuclear safety situation was so serious at Hydro that drastic action must be taken immediately? Why hadn't the AECB done that if the situation was that bad? It doesn't seem to make sense.
In fact, the testimony and the documented evidence show that the AECB under two presidents, Dr Lévesque and Dr Bishop, had been working might and main to bring Ontario Hydro to its senses. "Plan followed plan," Dr Bishop says: good plans from Hydro, good intentions. But somehow the plans were shuffled aside, Hydro's expressed good intentions overwhelmed by some other distraction. In fact, I would say from the evidence that the road to Dr Bishop's and the AECB's hell of the last few years has been liberally paved with Ontario Hydro's good intentions.
The explanation helps, but it raises a fundamental question: What happens when Ontario Hydro does not live up to its commitments? What if that should happen in the future, especially if Hydro is broken up or privatized or whatever? Nobody knows yet.
Certainly the AECB can shut down a reactor -- it has that power -- but that is absolutely the last resort. In the meantime it can advise, cajole, threaten this or that, reduce the performance rating, make life difficult. It did all of these things for the past 10 years or so as the situation got worse and worse. Nothing worked.
In fact, Dr Bishop says Ontario Hydro has the final responsibility for the safe operation of its reactors. That's not the AECB's responsibility. It's outside its mandate. And what if Ontario Hydro does not take its responsibility seriously enough, as Dr Bishop said to you was actually the case by July 1996? What happens then?
What happens then is that we have a crisis of the kind we're in now. Now, there's a fine kettle of fish. To whom does the Ontario public then turn for protection? Who in Ontario is going to act in the public interest and back up the AECB by cracking the whip over what is, after all, an Ontario crown corporation? Who has the power? Is there any whip to crack? Let's take a look.
There's no whip at the Ontario Energy Board. Rates are their business, and even then they can't tell Hydro what to do; they recommend.
The Ministry of Energy, Science and Technology has no jurisdiction on nuclear safety and is still getting organized.
The Ministry of the Environment has no authority in nuclear safety and no scientific or technical resources in radiation safety of any kind, which is why CAIRS has been called on by the ministry a number of times and has been glad to help.
The Ministry of Labour has some qualified people but no jurisdiction.
The Ministry of the Solicitor General has no jurisdiction, although it is responsible for the provincial nuclear emergency plan, but has quite enough on its plate trying to whip that into shape for next year's exercise.
What it comes down to is that the whole responsibility for public safety at Ontario Hydro falls entirely on the AECB, one relatively small federal agency. There is no backup, no one in Ontario the AECB can go to and say: "Look, we've set the standards, issued the licence for this or that reactor at Ontario Hydro. We're monitoring, inspecting and so on. We're doing our job, but they're not doing theirs. They are letting things slide and they are not paying attention to what we say. You're the owner here. This is a matter of public safety. Back us up. Crack the whip."
That's a pretty reasonable request, in our view, for the AECB to make, but there's no one in Ontario to make it to. The reason is that no one is in charge. There's no door to knock on to get attention, so the AECB goes back again to Hydro's board of directors and hammers away there. Much good that has done in the past.
What should be done? We would recommend to you that the Ontario government empower a scientifically and technically qualified body to act for Ontario in the public interest, not as a regulator, but fully respecting the jurisdiction and authority of the AECB, to act on behalf of Ontario in an oversight capacity in matters related to radiation and nuclear safety at Ontario Hydro. This body should liaise actively with the AECB and Ontario Hydro and should report regularly to a designated minister of the Ontario government on all matters of concern specifically related to nuclear and radiation safety at Ontario Hydro, the point being to ensure Ontario Hydro's compliance with AECB nuclear safety standards and directives at the very highest level.
The minister should be given authority by the Legislature to require the Ontario Hydro board of directors to implement AECB nuclear safety directives without delay and to be accountable to the Lieutenant Governor in Council for failure to do so.
That is our preliminary recommendation to you. No doubt it needs more in-depth consideration, but we need to make a start. We simply cannot go on in this backward and haphazard way. There is too much at stake for everyone. The government and Parliament of Ontario need to take a hand.
There is much more to be said also, but no more time in which to say it, on the lack of a developed nuclear safety culture in the public institutions of Ontario outside Ontario Hydro. There is more to be said too about the woeful lack of a carefully considered public policy on radiation safety generally for the proper protection of the Ontario public from undue exposure to radiation from a variety of sources, industrial and environmental. In the meantime, CAIRS will keep on working.
I thank you for listening.
The Chair: Dr Nolan, thank you very much. That exhausts the time for your presentation, but I personally found it of great value and interest and I know the other members of the committee did likewise. We appreciate it. It is tabled. If there are further questions, I'm sure we will be in touch with you very shortly. Thank you for attending upon the committee.
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ENVIRONMENTAL PROBE
The Chair: I would turn my attention to the next witness, Environmental Probe Ltd, Tony O'Donohue. For the purpose of Hansard, although you're extremely well known to me for your distinguished career on Toronto city council, if you would be good enough to identify yourself.
Mr Tony O'Donohue: My name is Tony O'Donohue. I'm the principal in Environmental Probe Ltd, specializing mainly in environmental issues and particularly in energy conservation and energy efficiency.
Mr Chairman, I'm going to keep my remarks short and to the point so that I have time to answer some of your questions. I will focus on the nuclear dilemma and make some suggestions.
I have read The People's Power: The History of Ontario Hydro, by Merrill Denison. It was written in 1960, 50 years after Ontario Hydro came into being. It was a glowing tribute to the utility from the first paragraph to the last paragraph.
Much has changed since The People's Power was written. Then, the peaceful use of nuclear energy were the new buzz words of nuclear scientists, after demonstrating to the world the destructive power of the atom bomb by wiping out the Japanese cities of Hiroshima and Nagasaki in 1945.
Then nuclear experts went to work to sell nuclear reactors around the world. The door to the nuclear age was open wide with the promise of unlimited clean energy for the future, and we were mesmerized by a host of scientists promoting the wonders of science and the use of the atom for peace. Ontario Hydro got on board, as did other utilities from First World countries. They all embraced nuclear generation and began to phase out fossil fuel plants.
It has now been over 30 years since that journey into the wilderness. That journey has been, to say the least, a hair-raising experience. Our commitment to nuclear energy has always been firm, but as we get to know more about it we are not so sure any more. Many other countries have the same uneasy feelings. Down deep, I feel we want to get rid of it too.
Nuclear power in Canada means thousands of jobs and a role on the world stage to market our Candu reactors. Presently in Ontario about 60% of electricity is produced by these reactors. They are primarily used to provide base load, with the fossil fuel plants taking up the slack for peaking.
In truth, the nuclear reactor has turned out to be a Pandora's box, a type of HIV infection of the energy world. Nuclear waste or spent fuel, a deadly cocktail, active for thousands of years, is continuing to pile up on reactor sites throughout the world, and Canada's 22 reactors continue to hold their waste as the search goes on for a final resting place. We have not heard the last of that search. That debate is just warming up.
By the end of 1995 there were 415 nuclear power plants operating in 25 countries around the world and producing just under 300,000 megawatts. The light water reactor is by far the most popular, producing about 80% of that energy. The Candu, or heavy water reactor, is used in Canada and five other countries. It is generally regarded as reliable and safe, but expensive. The first Candu was built in Pickering in 1971 and seven other reactors followed, for a total electrical output of around 4,000 megawatts by the mid-1970s.
Most of the world's reactors are now reaching middle age, a period when the signs of wear and tear become evident. Some are downright scary. I visited the Ignalina power plant in Lithuania in 1991, where two 1,500-megawatt, graphite-moderated, Soviet-type reactors are working. I prepared a report on Ignalina and presented it on my return to AECL. That report is available for anybody who wants to get a copy of it.
In a fossil plant, mistakes in operation or defects in materials are not uncommon. As well, starting and stopping require a lot of attention and maintenance. Routine maintenance can extend the life of a plant. But a nuclear plant is different. A reactor cannot be stopped and started like the fossil fuel plant. A reactor may work for a year or more without stopping, but the smallest mistake can lead to a catastrophe. Three Mile Island, Chernobyl and other accidents are examples of the potential for enormous disasters which could affect the whole world.
I believe that when a nuclear plant begins to show the signs of middle age, the time has arrived to begin plans for the decommissioning of that plant. Trying to squeeze out a few more years of an aging plant can lead to catastrophe. All we've got to do is look around and see what kind of nightmare we have in the old Soviet system.
Middle age, for most plants, depends on operations and maintenance. I would consider 100,000 hours to be a very modest figure before problems of age begin to show; 200,000 hours or about 23 years of operation is achievable but additional care and maintenance are then critical. Any time beyond 25 years is danger years. The time has then arrived to begin the decommissioning of the plant.
That brings me to the present problems of Ontario Hydro and its nuclear reactors. The seven identified, closed-down reactors should be decommissioned immediately. Money spent in repairing the reactors would be money wasted. As well, plans should be developed to begin the decommissioning of the other Pickering reactors by the beginning of the new century.
When Pickering was built, it was believed that the reactors would have a life expectancy of 30 to 40 years, operating at about 80% capacity. The many problems encountered have reduced the efficiency of these reactors and it's operating now at around 65% to 70%.
As a citizen of Toronto, I get the shivers when I think of the dormant torment of an aging reactor -- and eight of them in Pickering. If I had been running for mayor of Toronto I certainly would have made it an issue in this campaign. For me, nuclear power is no longer an acceptable option for the energy needs of the future.
I look at it basically as the Vesuvius of the nuclear system. The long-range plan for the province should be to build no more nuclear plants and begin the decommissioning process for the remaining reactors. That announcement would be good news to herald in the new millennium. I expect that Darlington would be the last plant to be decommissioned, beginning in about the year 2010.
Rather than waste the $8.8 billion in repairing the reactors, Ontario Hydro would be well advised to use the money to stimulate the way of the future: getting more from less. This will be a whole new industry for future generations, and I am disappointed that Ontario Hydro has gone in the opposite direction.
Perhaps the best example of a public utility leading the way in energy management is the Sacramento Municipal Utility District (SMUD) in California. SMUD opened its Rancho Seco Westinghouse 913-megawatt nuclear plant in 1974. Twenty-one years later, in 1995, they closed it and began the decommissioning process. The energy needs of Sacramento were studied by a variety of engineers, environmentalists and local people before the plant was closed. A plan was developed to help SMUD do without Rancho Seco. SMUD is a model for all utilities. It is operated as a municipal utility and like a business in the private sector, with energy conservation and energy efficiency as the foundation. The philosophy is simple: Get more from less.
SMUD provides loans, at lower-than-bank rates, to its customers to buy energy-efficient appliances -- must be below the national standards: lighting, shade trees, solar water heaters, building retrofitting etc. It also has a large budget to do research and experiment with alternative sources of energy. It would be worth your while, ladies and gentlemen, if you visited SMUD. I think you'd get a lot out of it.
Future generations will inherit a planet with the fossil fuel gauge almost on empty, a landscape littered with old, closed-down reactors and nuclear waste dumps contaminating the land for thousands of years. It sounds like a nightmare, but that is the way the future is unfolding. It all makes me so angry, and there is so little I can do about it.
The freedom we have in our democracy allows our politicians to be visionaries, but rarely accepts the vision if it costs more. The horizon is the next election. Very little thought is given to use our resources sparingly and leave something for those who come after us. The sad thing is that few would be elected if that type of philosophy would be advocated, because we would have to pay more and be a little bit more frugal.
I am not going to suggest that you commit political hara-kiri today on this one issue of nuclear power in Ontario, but I am going to suggest to you collectively that you put aside your party labels and adopt a whole new package of reforms in energy and electricity which will address the present and the future as well.
The future is just as important as the present. The quality of life for future generations, if life is to continue, will depend on how we take care of our planet and how we use our dwindling fossil fuel resources. There is plenty of room for us to be visionaries and do things right, but there is little time. I therefore make the following suggestions to you:
(1) Begin the decommissioning of the seven nuclear reactors now.
(2) Begin the decommissioning of the remaining Pickering reactors by January 1, 2000.
(3) Prepare to phase out all the other reactors and begin decommissioning them all by 2010.
(4) Adopt a policy of more from less.
(5) Bring in legislation to phase out wasteful appliances, lighting, heating, ventilation etc.
(6) Use the $8 billion earmarked for the seven reactors to help set up the more-for-less fund.
(7) Legislate that Ontario Hydro place the $2.6 billion collected from electricity bills into a special fund for decommissioning, which cannot be used for other purposes.
Thank you, ladies and gentlemen.
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Mr Kwinter: As always, Tony, it's interesting to read your views, and you certainly have a lot of experience in it. Just a couple of observations so you know where we are.
The $8 billion that has been earmarked is not for the seven reactors. A good chunk of that is for replacement fuel while work is being done. I think the amount that is going into actual hardware is less than $2 billion. The other is for replacement energy during the period of recovery.
I agree, and I've heard from James Schlesinger, who was in charge of the US atomic energy program, that once a reactor shuts down it never reopens. The concern I have with your recommendation is that somewhere along the line -- we are 60% dependent on the nuclear facility. They are going to shut down seven reactors. They are going to try to get these things back up. The short-term requirements are what I'm concerned about. At the present time we have a situation where there is surplus energy in the grid. It looks like this can be done, but to follow your particular strategy would mean that by 2010 at the latest in Darlington, you'd shut down all the nuclear. Is there, realistically, an opportunity to replace that 60% in that time frame in a way that has got to have economic sense? You can't just say, "We're going to do this," if it makes no sense, if we're no longer competitive and we can't provide energy to the people who need it at a price they can afford.
Mr O'Donohue: From a practical point of view, you're probably very right. I'm not suggesting that you fire up the power plant again, which is 1,200 megawatts. I'm not suggesting that. What I am suggesting is that you follow the examples shown by SMUD, which closed down its nuclear reactor and went into a conservation and energy efficiency program and replaced the need for the 913 megawatts. I think that's the philosophy they have to follow.
To answer the other part of your question, what do you do in the meantime to fill the gap, yes, I think you will have to stoke up some of the Lakeview generating plants, the plants you have, to try to fill the gap, but your focus has to be on energy conservation and energy efficiency. The $8.8 billion would be very well spent in developing alternative sources of energy, in developing the approach to buildings that they have done in Sacramento and taking that kind of a more-for-less approach.
If you were to say, "We're going to build more plants," I think that's the wrong road. You don't have to do that. The money is in the efficiency. It's a whole new industry out there when you can get, for example, a refrigerator that will save 75% of the energy that the old one used to use, that kind of approach, and lighting is the same way, about 70%; you get rid of the incandescent lighting and put in your metal halite and high-pressure sodium and lighting like that. That's the philosophy you've got to follow.
Unfortunately, I think you're in the wrong mode here with Ontario Hydro. They have really destroyed the system in their approach to it. They turned down cogeneration a few years ago, although they gave it some lip-service, but they never did anything about it. They stopped us when we tried to do a plant in Toronto because it was interfering with their monopoly. That's the kind of thing you're faced with. It's a more fundamental thing. If you went into cogeneration, from a fuel point of view you'd get probably about twice as much energy out of the fuel than you're presently getting out of Lakeview.
Mr Laughren: Thank you, Mr O'Donohue, for appearing before the committee. I think you've put your finger on what we are wrestling with. When you talk about Darlington and the B units being decommissioned from 2010 on, that's not something we're wrestling with and I don't even see that as part of the mandate of our committee. That doesn't mean you're not perfectly entitled to express that view, of course. It's the A units at Bruce and Pickering that are causing us -- I don't want to speak for my colleagues -- to really anguish over what the solution is, because that's a problem. We did hear, as Mr Kwinter said, that once you shut down a plant it's not going to reopen, not with any kind of efficiency. So we are agonizing over that, at least I am.
I worry, partly because we went there, about the Bruce Peninsula. I wonder if you have any thoughts to share on that. There's a place that is, in communities like Kincardine and Port Elgin, very dependent on the Bruce station and the Bruce Energy Centre. If we shut down the Bruce A, if Hydro does, and if Bruce B is recommended to be shut down, that's going to play hell with the Bruce Peninsula. I wondered if you have any thoughts about how that could be at least ameliorated so that it doesn't devastate that community.
Mr O'Donohue: I'm looking at our own model here in Toronto as an example. We have what they call the Toronto integrated energy study over the last four or five years, called the TIE study, where rather than put a lot of money, $500 million, into the transmission lines, the suggestion was that we build smaller cogeneration plants. I would say that under the phasing out of nuclear power plants, what we should be doing is building smaller cogeneration plants, and that probably would fit into the category that would address some of the problems you have with respect to --
Mr Laughren: Build them up there, you mean?
Mr O'Donohue: Yes, build them up there.
Mr Galt: It's rather obvious that you're not too enthused about nuclear power. Certainly as time has evolved we have been told how the preventive maintenance of these reactors has been ignored and has been for some years, and finally, somebody has had the intestinal fortitude to stand up and say, "Enough is enough," have an investigation and carry it out, and we're at this particular point.
Regardless of what you use to produce electricity, there is some environmental concern. As you were going through, you seemed to be rather heavy in your opposition to nuclear as a way of producing electricity but rather light on alternatives. You talked about conservation, that we need 60% conservation if we're going to get rid of the nuclear reactors. You talk about refrigerators that are 75% more efficient. You talk about tremendously improved lighting efficiency. But that's a small portion of the total consumption. We still have heavy industry out there, with great big motors requiring tremendous quantities of electricity. Where is that going to come from? What are your suggestions to compensate for that?
Mr O'Donohue: I think I'm fairly clear on that. First of all, I used to believe in nuclear energy until I went to visit the Ignalina power plant in 1991. That gave me a different view of nuclear energy, the way we were sitting on the edge of the cauldron. What I would like to focus on, if I were in your position, is the opportunities you have with the Ontario Hydro breakup in the monopoly. I would get some of the private sector working to go into cogeneration plants. I think that's where the answer is. I would hope that smaller municipalities -- well, Toronto is a big municipality. I think our load is about 4,000 megawatts.
Mr Laughren: And getting bigger.
Mr O'Donohue: Yes, and getting bigger. We could put up a couple or three or four plants within the perimeter of the city that would look after all that, and you wouldn't have to worry about it. That's something I think no planning has been put into. Hydro has never looked at it. They've always looked at protecting their monopoly. When you look at it from that point of view, yes, you have some very serious problems. I'm saying you've got to change your total outlook on it and let the private sector and the municipalities come in and build cogeneration plants. I think that's the answer.
The Chair: Thank you very much, Mr O'Donohue, for attending upon the committee. If there are any other questions, I know you'll respond to them in writing where necessary.
To help the members of the committee, may I remind you that sometimes your questioning is reaching to or exceeding the two-minute mark with the preambles, and that doesn't help you a great deal when there are only two minutes to ask a question. I have been a little bit generous in the time of responses, so please mark that. Also note that it is not the usual tradition of the committee to engage in participatory questioning, so we will try to keep that confined to one caucus at a time, and that would be helpful.
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WEST HILL COMMUNITY ASSOCIATION
The Chair: Let's begin with the West Hill Community Association, please. We have a maximum of 20 minutes for questions and/or answers, but that includes the presentation. Welcome to the committee.
Mr Clem Okonkwo: My name is Clem Okonkwo. I am the president of West Hill Community Association. The purpose of our presentation today is to draw the awareness of the government and members of the Legislature to the fact that the communities around the Pickering power stations are not frequently consulted on issues that affect the area in terms of the spills that have occurred in that area. We live very adjacent to the plant itself, and we are completely isolated from most of the decision-making processes.
From 1976 to 1978, we noticed a lot of ecological destruction in that area, and we decided to meet together as communities and investigate what the causes could be. In the process, we discovered a lot of things which eventually were done on an individual and collective basis. Our community is not sponsored by any organization, we are not financed by the government, and we do not solicit money. Most of us are professional people who spend our spare time making the communities look better than they are.
Eventually, most of the findings we discovered were related to the government: the municipal government, the provincial government and the federal government. The responses we got were that they were not allowed to infringe on the nuclear power station or decisions that would affect its operation; that we should convey our complaints to the Atomic Energy Control Board in Ottawa. Apparently, within the same period was when their application for licensing was due for renewal. We made a petition in Ottawa presenting our findings, with slides and other documentation to support our discoveries, causes and recommendations in comparison with other areas with similar types of operation.
Eventually, we were turned down, told those recommendations were not appropriate in light of reconciliation of staff reports in logging operations and causes of the accidents and recommendations made in suppressing those concurrences. We continue to monitor the area from time to time, but each time there is an accident there, when we find out there is an accident, we try to call the public relations officer there, but we don't get any response. They turn us to the Attorney General's office, who refer us to the police board in charge of the area.
We also requested the emergency preparedness operations that we were told were in effect, and we were misled on several occasions; it was not until around 1994 that we are told where to get a capsule and those who were involved in it.
The population in that area has increased dramatically and there have not been any exercises or drills to acquaint the newcomers or the old people with what they should do in terms of emergency. From time to time, the area there is quite difficult to deal with. Highway 401, that leads to Kingston from Toronto, is frequently closed like a bottleneck, that only one particular zone could be utilized at a time. We're wondering what will happen in terms of emergency, what other measures or alternatives the government has in place to evacuate people. We are told also that in times of emergency the automatic telephone dialling system will wake everybody up. We have not seen this in place. It has not been drilled; it has not been exercised. This is quite a complete misconception and misleading to the public.
We are also told the locations where the capsules would be retrieved or the people who were involved. We made an effort to communicate with those people, and they were completely ignorant of all these assumptions and claims.
What we are asking for is, in terms of safety, what is the public expected to do and whom shall we communicate with? There is no literature or any type of educational processes going on there. More schools are being built, and in comparison with accidents involving radiation that have occurred in other places, a nuclear power station is not a very advisable place. Beside that, it is located within a seismological area, and if there is any earthquake it will not withstand the tremor.
Because of the constant accidents that occur in that area, we're recommending that the government look twice in terms of phasing it out, because of frequent misleading examples or procedures that are not actually in existence.
I don't know exactly where we stand, whether the population there will continue to increase, with the frequent accidents or radiation occurrences. There have been many emissions of fissions in the air from time to time in that area. Nobody monitors the air quality there. Nobody monitors the water quality there, with injection of steam water into the Ontario rivers. In the west part of it, families get together and swim and do all sorts of things there. We are asking for public participation, public education and, more important, safety as a whole.
We have made some comparisons of the Pickering power station with other areas where accidents have occurred. Some of us are quite familiar with the operating systems in nuclear plants. Nevertheless, we are completely isolated in terms of community efforts, community awareness and community education. That's one of the purposes of our coming today.
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Mr Laughren: Thank you for coming before the committee. Have you ever been part of the process of emergency planning in the areas of the Pickering and Darlington plants?
Mr Okonkwo: No. We are told it's being handled by the Durham regional police officer whose name we mention in the brief, but we have never been informed. We live in Highland Creek, which is just the next boundary to Pickering, and we feel we should be involved in something like that.
Mr Laughren: I gather they're developing a new plan, I think for next year. The police chief came before us and indicated that they were developing a new emergency measures plan. I wondered whether you had either sought to get information about that or had been invited to be part of that process.
Mr Okonkwo: No, sir. We have been in touch with Durham Nuclear Awareness, based on the fact that our findings were published in the Toronto Star some years ago. On two separate occasions we went to Ottawa to make deputations on the same issue. Nothing came of it, and this is one of the reasons for demoralization in our community, that nobody seems to care.
Mr Galt: Good afternoon. We've been told regularly, over and over again, that these units are safe, that it does relate to efficiency, that provided we're not pushing them, they are indeed safe units. We've been told this by many groups, and that one of the problems we've had over the last many years is that there hasn't been the proper routine maintenance.
The AECB, the Atomic Energy Control Board, oversees and looks after those. Are you not comfortable with agencies such as this keeping an eye on operations such as Pickering?
Mr Okonkwo: We've heard that there could be suppression of information and also collusion in the sense of people trying to protect their own alliance or organizations. I don't think anybody would be very pleased to go to a doctor who would tell him he's crazy, so in that aspect, most of the consultants they hire do what they tell them to do. We do not think they overstep the boundaries or what their limitations were, because they are paid by the time or by the piecework or by the hour.
Not only that, we seem to be very familiar with some of the problems they encounter, but we're not being involved in any type of decision-making or contributions as far as what should happen in times of emergency.
Mr Kwinter: While you were giving your presentation, I was reading ahead through your written presentation. I understand your concerns, but as my colleague has stated, one of the things that has been repeated by every responsible official is that safety is not a concern, that they are satisfied that the nuclear reactors in Ontario are safe.
Having said that, I can understand your concern. From what I gather from reading, a lot of it has to do with improper communication, that you're not being made aware of what's happening, you're not being made aware of who the people are who represent your particular area, your particular community, on any kind of program in case there's an emergency.
It would seem to me that one of the ways to ease some of the concerns of the people you represent is that there should be some kind of meeting with the officials to make sure that the lines of communication are really there and that you are at least informed of what's happening. Do you feel that would go a long way in helping your problem?
Mr Okonkwo: That's part of it. Another part is if there had been no problems there, there wouldn't be any recurring accidents. Most of the accidents happen and we hear about it and we know about it. We ask, but we are not given information because they don't want to stir up public concern. Maybe they believe it's going to die down by silence. It doesn't help. Many people have moved out because of scenarios like that. They were afraid.
As we said earlier, we have made some investigations. Many of us are professional people, and everybody contributes from his own area. We know quite well that plant is situated within an earthquake zone and there is no protection. There was no type of acumen when they built that plant to make provision for earthquakes. If there is any earthquake there, I don't think there wouldn't be any accident.
The Chair: Mr Okonkwo, thank you very much for your time and for attending upon the committee. I thank you very much for your brief. It's extensive, and we'll take that under advisement.
CANADIAN WIND ENERGY ASSOCIATION
The Chair: We will turn our attention to the Canadian Wind Energy Association, Jim Salmon, please.
Mr Jim Salmon: My name is Jim Salmon. I am the vice-president of the Canadian Wind Energy Association. Thank you for the opportunity to speak to the committee today.
I had intended to show some coloured slides which I had made up, but apparently it's not available at the moment, so you can go through my information, which I also apologize for not delivering beforehand. I'm new at this. There are copies of my slides in your packages. If you can follow along, that would probably be helpful.
I am going to speak about wind energy today. In the context of this committee, I'm going to try to address at least two of the three terms of reference of the committee. I will not address financial justification -- that doesn't seem appropriate -- but I will talk about economics and viability of alternative supply options, and that will peripherally address environmental impacts.
I have subtitled my presentation: "We have lemons. Why doesn't anyone want to make lemonade?"
If you look at the next slide, there's some information on wind energy. I'd like to go over it quickly. I'd like to put in perspective what the state of wind energy in the world is. For example, World Watch Institute in Washington stated in 1996 that wind energy is now the world's fastest-growing energy source. That is indeed true on a percentage basis. In that year, 1996, more wind energy was installed in the world than nuclear energy.
Canada has far more wind energy potential than its current total use of electricity. There is no shortage of wind energy. In 1996, for example, half of the residential needs of a city the size of Metropolitan Toronto was installed worldwide. In Germany alone, enough wind energy was installed to supply the residential needs of a city the size of London, Ontario. Shell International, which has never been any great fan of renewable energy in the past, although it's coming on board, estimates that by the year 2050, 50% of the world's energy will be supplied by renewable resources, and the two renewables they mention are wind and solar.
This summer the United Nations stated in a report that "Wind generation has been recognized worldwide as a technologically mature energy source which can supply clean, sustainable, reliable and cost-effective power."
There's a table on the next page which shows how much wind power is installed in the world. In that table, you can see that in Germany, for example, there are 1,675 megawatts of installed wind power. That's enough to power about 367,000 Canadian residences. If those residences were in Europe, it would probably be double that amount, because Canadians use a lot of electricity. In total in the world, there's enough wind energy installed to power about 1.4 million Canadian residences. Germany, for example, installs approximately 600 to 700 megawatts of wind power a year. That's about one and a half nuclear reactors.
There are a couple of tables which show prices versus year. I apologize; one is in US cents and one is in British pounds. The only thing I want to point out is that the trend is down. It has been down for the past 20 years. It continues to go down and there is no reason to expect it not to.
On the next slide, I talk briefly about the history of Ontario Hydro with wind energy. They have in the past undertaken a variety of small test and demonstration programs. In 1995, they installed one 600-kilowatt turbine. That was a single turbine at the Bruce, which I think the committee may have seen. It is capable of supplying about 150 households, that single turbine. It has been running very reliably and producing power for Ontario Hydro since it was installed.
In 1994, Ontario Hydro started their renewable energy technologies program, which was focused on technology development, demonstration and learning. The centrepiece of this was a request for proposals for up to 125 megawatts of grid-connected renewable energy projects. After a torturous two years of proposal and review, it was cancelled summarily in 1997, with cost being cited as the reason.
The situation in Ontario today: Is there any wind resource? I guess that's the first question you would like answered. I happen to do work in wind resource assessment. As far as I'm concerned, there is lots of wind resource in Ontario for wind energy. There is an estimate from an American company, R. Lynette, of 24,000 megawatts. That would be for fully established wind development throughout Ontario. The good sites are along the eastern shore of Lake Huron and the northern shore of Lakes Erie and Ontario. They have a good wind regime. They have lots of agricultural land, that is, cleared land without trees, and they have a grid system. They have everything technically required for wind energy.
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A financial resource? If firm contracts were available, the money would become available. This is in terms of independent developers putting in wind developments. The other alternative would be utility financing right through Ontario Hydro, and that would drive down the price.
There is a picture of that turbine that you may have seen. There's also a map which shows where the wind resource is available.
In Ontario, if the utility did decide to go ahead and install wind energy, once contracts and planning permission were in place, the initial turbines would be up and running in less than a year. Wind energy does not take a long time to get going. You phone the factory and ask for some wind turbines. They ship them over. You build a foundation for them and you put them in and you hook them up to the grid. That's one nice thing about wind: It's modular. If you need 100 megawatts next year, you only have to put 100 megawatts in. You don't have to put 4,000 megawatts in all at once. You don't have to finance it all at once. You don't have to build it all at once. You put in what you want.
The economics: As it presently stands in Ontario, it's about eight to 10 cents a kilowatt-hour. That's what the developers tell me they can install wind energy in Ontario in those good regimes for. We could expect reductions to five to seven cents per kilowatt-hour, say, by the year 2000, with larger projects, with newer and more modern equipment or with utility financing.
What are the benefits of installing wind energy in Ontario? It would be a reliable replacement for the electric power of the laidup nuclear units. There would be no CO2, NOx, SOx, toxic metal or chemical emissions. There would be no radioactive waste to worry about. There would no solid waste to dispose of. There are no known health risks with wind energy. It would create quite a number of high-quality jobs in Ontario. There is export potential, but that would only occur if there were a large industry created here. The investment would be in Ontario and not in, for example, Ohio. There would be fuel security; no foreign government can cut off your wind. Fuel price security would accrue, because once you've built it and you run it, there are no other costs. There are no fuel costs. There is an O and M cost, which is very low for wind energy. You would have diversity of generation; you wouldn't have all your eggs in one basket. And there's a natural synergy with the abundant hydro-electric power that exists in Ontario; wind and hydro work very well together. I can explain that to you, if you'd like, later.
So why is there no wind power generation in Ontario? Well, there's no market. Ontario Hydro is the only customer, and it doesn't want any.
How should we proceed to get wind energy installed in Ontario? I have a two-part plan here. I think we should reactivate the RETs program that I referred to previously. In a report by EcoPathways Consulting, they said of that plan that there are still 160 megawatts of original projects still available to go -- in other words, the proponents would be ready to go ahead with those projects -- capable of producing about 560,000 megawatt-hours per year, and it would be at an average guaranteed price of 10.2 cents per kilowatt-hour. The premium cost of doing this, over the absolute cheap, dirty cost, would be about $75 million, interestingly enough less than 1% of the $8 billion that has been mentioned with respect to recovering the nuclear units.
Just as an example, by doing this, about 0.7 teragrams per year of the 4.0 teragrams per year of CO2 that Hydro needs to reduce to reach 1990 levels would be achieved. That's 18% of that goal.
Part 2 would be to issue further unrestricted RFPs for wind and renewable energy. The original RETs program from Ontario Hydro had some restrictions which drove the price up for the proponents of the program. In the second request for RFPs, it's recommended that these be unrestricted and that they be allowed to go up to any size they want so that the proponents can achieve economies of scale.
There's a large resource available to do this. The price will go down. Seven cents a kilowatt-hour is currently being bid in the US, and that's seven cents Canadian. There's potential significant economic benefit to do this. There are some other issues to do with wind energy. One is jobs. Wind power creates more jobs per unit of energy produced than most other technologies; by some estimates, it's four times as many jobs. In terms of CO2 emissions, climate change, the upcoming meeting in Japan, having wind power within the Ontario Hydro mix would be of benefit to them, particularly if enforceable CO2 emission limits are mandated at that meeting. Certainly the Prime Minister seems to be enthusiastic about Canada putting on a good face there.
In terms of utility deregulation and future customer choice, which appears to be going forward, there would be a potential for marketing green energy. Lots of studies and surveys have shown that the public is very enthusiastic about green energy. They are also willing to pay for it.
In summary, electricity generated from wind: It's reliable, it's cost-effective, it's available in large quantities in Ontario, it creates good jobs, there are no emissions or waste to deal with and there are no known health risks. Let's proceed into the next wind-generated millennium, not back to the coal-fired Industrial Revolution.
Mrs Barbara Fisher (Bruce): I happen to be the member for the riding of Bruce, the one with the wind turbine generator just outside the site that the committee did get to see last week.
I believe that future energy generation in Ontario will very much lead into the blend of options you talk about. It's not hard to see the benefits of having a diversified package. But I will ask this: I, for a long time, have been a believer that if the private sector is able to compete, it should do so, and that if it wants to enter the grid -- in the monopoly that existed in the past, it didn't allow for that to happen.
But you talk about 10.2 cents a kilowatt-hour. You might say that the capital costs in are low, but obviously somebody has to absorb the difference between the potential production costs of anywhere between 1.7 and 3.2 from a nuclear generator. As the Bruce site seems to be significant -- and I know it has been studied very extensively -- how do you think we could sell that type of philosophy to the taxpayers of Ontario, to the consumer, who doesn't look forward to any type of increase in rates today?
Mr Salmon: I think there are two factors here. One is that the so-called dirty energy, coal, for example, is not paying its full share of the cost. It's not paying the social cost, the --
Mrs Fisher: A carbon burden then.
Mr Salmon: Exactly, but I know that to say, "Let's have a carbon tax," today would not be received very enthusiastically either by the government or the public, but I feel it's worth saying that. What you don't pay for your fuel, you pay in your health costs, you pay in your remediation costs, you pay all the way down the line. That eventually tends to become a burden for the government. The other way is that within Ontario, Ontario Hydro itself has done surveys and they've determined that a lot of Ontarians are willing to pay a premium for their energy if it's clean.
Mrs Fisher: Maybe that's the way it could be competitive, if it's sold into the grid at the same rate or an equivalent rate of anybody else in terms of production and then you would find your customers for the difference in rate.
I have one other question. The impact with regard to using up prime agricultural land was not discussed, and there are tens of thousands of these types of units required to replace the volume of capacity production from the Bruce nuclear site. What do you think the agricultural community will think when their land becomes no longer agricultural land? Where is the impact to offset that now in the study?
Mr Salmon: The California experience -- they tend to be ranchers down there -- has been that the ranchers have been just delighted to get wind turbines on their land because they are always getting paid.
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Mrs Fisher: But the California model often shows the rolling landscape. It doesn't show --
The Chair: Mrs Fisher, we've come to the end of our time. I just wanted him to be able to finish his answer.
Mr Salmon: It's another cash crop for them. Typically, only 5% of the land is required for the generation. The other 95% is available. There are other benefits that accrue to the farmers too. They get roads built in to their land that they otherwise couldn't have and so forth.
Mr Kwinter: Mr Salmon, I've seen some of the wind turbine farms in California. It's quite awesome to drive by and see all these things going, generating electricity. But realistically, what do you feel the market share of the energy market in Ontario could be with wind energy?
Mr Salmon: Realistically?
Mr Kwinter: Do you feel it could replace all of our nuclear requirements?
Mr Salmon: Let me answer that by referring to Europe. Most governments in Europe are setting targets for renewable energies in the near term of 10%; in the longer term, let's call it the medium term, of 20%; and some optimistic countries, Denmark for example, are looking to get 50% of their energy supply from renewable energy. That's in the long term, say by 2050. So you can pick any number between those.
Mr Kwinter: You say that in Europe most governments set a 10% target. How close are they to their target?
Mr Salmon: Denmark is very close to being there. Germany is, I think, at about 2% or 3%.
Mr Kwinter: I have no problem with the idea. I just want to know how practical it is. I know it's a proven technology.
Mr Salmon: It is practical.
Mr Kwinter: It's a proven technology. I'm not questioning that part of it. How practical is it for becoming a major dependent source of energy? I think solar, wind turbines, all of these things are great and people should be supporting them but, again, I have that nagging concern that it's fine to augment what we've got, but can we really become truly dependent on that and that alone?
Mr Salmon: I think that's way in the future, but I think it's possible.
Mr Laughren: Thank you for coming before the committee. I'm going to be as blunt as I can without offending you, I hope. I like your presentation. As Mr Kwinter says, it's really a nice component of energy. I don't put myself or other members of the committee in this category, but why is it that people still sneer at wind power? They really do. When you talk to people in the establishment in Ontario about Hydro, and quite frankly in the Ministry of Energy as well, they literally sneer at the concept of wind power. Is there a reason this continues to be the case? Is it just that it's too soon and that proponents such as yourself just haven't been able to break through? That's my spin on it, anyway.
Mr Salmon: I agree with you. I believe it's because the people of Ontario are not familiar with wind power or perhaps any of the renewable energies. In England when they install wind turbines at some sites, they have polls. They poll people when they go in to see the site, to see the wind turbines or the wind farms, and they poll people when they come out. When the people go in, they have something like a 30% to 40% acceptance level; when the people go out, they have something like an 80% to 95% acceptance level.
Mr Laughren: I'll tell you, even at Bruce Peninsula the Ontario Hydro people would fit in that category, I would say, of sneering at the windmill, even though it's theirs.
Mr Salmon: I don't think people in Denmark would tend to sneer so much. Denmark tends to be the country with the highest percentage of installed wind power. Their government actively promoted wind power in the early 1980s. Wind power now makes up the second-largest export in that country, second only to pharmaceuticals.
The Chair: Thank you very much, Mr Salmon. We appreciated your deputation.
HEAT, STEAM AND POWER INC
The Chair: The next deputant is Heat, Steam and Power Inc, Patrick Gillette. Would you be good enough, for the purpose of Hansard, to identify yourself and your colleague at the witness table.
Mr Patrick Gillette: Good afternoon, Mr Chairman and committee members. My name is Patrick Gillette. For the record, my academic credentials are a master of environmental studies degree and a master of public administration degree. One of my major research fields has been on the Ontario electrical industry. I am currently the general manager of Heat, Steam and Power. My firm produces a combustion unit used in the burning of biomass and other wastes for cogeneration projects. My companion is the vice-president of Heat, Steam and Power.
I want to begin by thanking the select committee on Ontario Hydro nuclear affairs on behalf of Heat, Steam and Power for the opportunity to make this presentation. To leave the committee members time to ask questions, I will attempt to be as brief as possible. I would also like the committee members to consider our written submission as a draft of the final document, which will be submitted with the committee's permission later this week.
The technology is a Canadian invention which has received environmental approval in Canada and the United States, has a wide and varied fuel base and is ideally suited for small cogeneration in Ontario, where we believe exists a readily available source of combustible materials for fuel.
In my submission I stated that I would organize my presentation around the feasibility of small cogeneration plants in Ontario. Then, if time allowed, I would attempt to bring my presentation around to the matters directly concerning this committee.
Cogeneration refers to the simultaneous production of electricity and useful thermal energy -- steam, hot liquids or gases -- from a single energy source. Two primary technologies are used to produce this electricity and thermal energy.
The first method is the burning of materials -- biomass, waste and fossil fuels -- to produce processed heat for the production of steam, which is then used to generate electricity and then transferred, in an open or closed loop, as processed heat for industrial processes. This is the methodology used by Heat, Steam and Power and is known in the industry as a steam turbine set.
The second method is a combustion turbine unit, which produces electricity through the burning of liquid or gaseous fuels to rotate a turbine, which in turn generates electricity. Then, using a heat recovery system, the usable thermal energy is extracted to produce usable processed heat.
How much cogeneration is there in Ontario? While projections from the Ontario Energy Board, Ontario Hydro and industry experts vary, it is generally accepted that approximately 3,000 megawatts of cogeneration capacity is immediately available in Ontario. Another 4,000 megawatts to 6,000 megawatts could be easily developed over the next five years. If you refer to appendix 1, of which there are five copies, for which I apologize, there is a submission of articles confirming the preceding statement.
Partially confirming these estimates is exhibit 4.1.4, Ontario Energy Board Rate Hearings, 1993, "Reporting Results for Non-Utility Generation." This is an Ontario Hydro document submitted to the OEB. If the committee will refer to appendix 2 of this document, they will see that when Ontario Hydro requested submissions from the public and private sectors for non-utility generation in 1991-92, it received 6,025.45 megawatts in capacity. A large proportion of the electrical capacity reported in this document, between 55% to 91%, was classified as cogeneration, natural gas or as waste burning. If the Etobicoke olympic pool in Etobicoke and the University of Toronto projects are considered, which are in this document, then it is likely a large proportion of the projects classified as natural gas in that document are actually cogeneration projects. I make this assertion because both projects use thermal energy from their generating sets for heating.
Taking this into account, we have at least a partial confirmation of the documentation presented in appendix 1. This also shows that the capacity and market interest exist in Ontario for further growth in the non-utility generation sector of Ontario's electrical market.
1610To bring this into perspective, I would like to highlight Heat, Steam and Power's latest project. With Energy Plus 2000 Ltd, Heat, Steam and Power has put forward an application to produce 15 megawatts of electricity for Ajax Hydro and Ontario Hydro at the Ajax steam plant located in the city of Ajax. Moreover, in the past week another similar project has been brought to my attention. If this project is approved by Ontario Hydro, Energy Plus 2000 and Heat, Steam and Power will be investing approximately $15 million at this site. The spinoffs of this project are as follows:
It will provide for the next 20 years, with the installation of new equipment, a stable source of economical electricity and steam for the city of Ajax, encouraging indirectly the maintenance and expansion of the city's industrial and commercial base.
The expansion of the plant will allow for approximately 3,000 tonnes of wood waste that would go to landfill to be used as fuel.
The investment being made at the Ajax steam plant will bring the latest in combustion and pollution abatement technology to this facility, leading to higher energy efficiencies and lower air pollution than is currently produced at the plant.
The $15 million in expenditures will create or maintain jobs in heavy industry, engineering, computer technology and construction, using private sector funds.
Finally, this plant will be able to deliver all of its electricity to the grid, with minimal transmission losses due to electrical resistance. This is due to its location in the centre of the city of Ajax and close proximity to a former transformer station.
I would like the committee to note that this project will be built with private sector funds. Therefore, all the risk is being assumed by the principals involved, whereas the citizens and industrial sector of Ajax will realize many benefits from this project at no cost to the public sector. Moreover, this is a true cogeneration project with an existing customer base, and we expect that this project, if approved by Ontario Hydro, will double the plant's current levels of efficiency.
Now I would like the committee to consider the economic benefits of 100 such projects, or 1,500 megawatts of additional cogeneration on the market, which is equal to the approximate capacity of three to four of the reactors that have been closed.
The installation of 1,500 megawatts at $1,000 to $2,000 per kilowatt of installed capacity would equal $1.5 billion to $3 billion in private sector investment in the province. In addition to the employment this would create, there would be an increase in the overall tax base and an opportunity for retirement funds to be channelled into developing this generating capacity, thus opening Ontario's electrical market to the long-term financial benefit of the average investor.
The economic foundation of cogeneration is that it uses energy more efficiently. Currently, many firms generate thermal energy for industrial processes and buy electricity from Ontario Hydro. To generate this electricity, Ontario Hydro is also, in most cases, generating thermal energy. In both cases, a large amount of this thermal energy is vented to the atmosphere. Cogeneration simply reuses the firm's thermal energy to produce electricity. This inevitably reduces costs for all concerned. Through a net reduction in costs a stronger industrial base will be created in Ontario.
The above economic variables are well established. The question the committee must consider is whether Ontario can ignore the benefits being achieved in other markets where cogeneration is promoted.
The environmental benefits of cogeneration are also well worth considering. By exploiting the thermal energy produced by firms for cogeneration, there is a net reduction in pollution emissions. By increasing Ontario's efficiency in its use of energy, there is also a net reduction in the use of non-renewable fossil fuels. Moreover, the increased use of biomass and municipal waste as a fuel would create a renewable fuel base and reduce the net tonnage going to landfill.
The final environmental point I would like to make is that restrictions on CFCs will encourage industry to find alternative air-conditioning technologies. One option is absorption chillers which utilize steam. In the case of operations like the Ajax steam plant, there will be an increase in demand for steam during the summer months, making these operations even more profitable in the future and contributing to finding an alternative to CFCs.
At this point, if there are no questions, I would like to summarize my preceding statements and comment directly on the question facing this committee.
The Chair: Please just complete.
Mr Gillette: What is my time limit right now, sir?
The Chair: You have about another 10 minutes.
Mr Gillette: There is adequate evidence, which I gathered in just a few days, to show that there are sufficient sources of non-utility generation to meet some or all of the approximately 4,280 megawatts of generating capacity lost by the seven reactors closed at the Pickering and Bruce plants. The bulk of this capacity is either hydro-electric or cogeneration, fuelled by biomass, natural gas or other waste materials, with their inherent economic and environmental benefits.
If the above factors I have outlined are considered, there are sound reasons to consider allowing this option to be developed in the province, whereas in addition to these factors there is the initial cost saving of up to $8 billion to Ontario Hydro and the provincial government if some or all of the reactors in question are mothballed.
My two graduate degrees were spent examining Ontario Hydro's nuclear program in detail and the possible ways it could be reorganized. Therefore, I am now putting forward my own personal observations based on my research on the subject at this point.
First, the $8 billion in question is not the end to the maintenance costs on these reactors. In fact, as this committee knows, the bulk of the $8 billion is for fuel and restructuring costs. In appendix 3 of my submission you will see a maintenance estimate from 1986 showing the projected expenditures on the now closed reactors entitled Ontario Energy Board Hearing (OEB), 1985 Rates, exhibit 4.20, "Fuel Channel Replacement."
The bulk of this maintenance, it is my understanding, has been completed at Pickering, whereas it is my understanding that Bruce still requires intensive maintenance, much of which is outlined in this report. The importance of this document is that these costs have been ongoing, and Ontario Hydro was well aware of the problem. Now recent developments have forced their closure after large amounts have been spent, with further expenditures required. The utility has come to the government once again asking for further financial support, the bulk of which is related only to fuel costs.
If the $8 billion is added to Ontario Hydro's debt, it will place the utility in a worse position than it was in the early 1990s, whereas this time there are no staff reductions open to reduce costs. The only alternative is for the government to directly assume this debt. The only other option is to maintain the current system and increase the price of electricity.
I would also like the committee to note that the two arguments that are made in favour of a public monopoly for electricity have just been brought into serious question. The first question is whether Ontario Hydro can guarantee a stable supply of electricity. The combination of seven reactors closing with 11 reactors needing repairs and the increase in debt will weaken that argument. The second question for maintaining the monopoly is whether Ontario Hydro can maintain the current prices, ie, keep them low.
The scenario I have outlined above means one of the two arguments is not necessarily valid. Moreover, with consideration, both can be brought into doubt.
Ontario's electrical industry over the next 40 years also must recapitalize to the tune of $40 billion. During this period, which is now starting to happen, another $13 billion must be spent on maintenance costs. In addition to these costs are the approximately $8.68 billion to $13.32 billion in upfront nuclear waste disposal costs, of which Ontario will be responsible for a large proportion, and approximately $2.5 billion in reactor decommissioning costs are also coming due, for a total expenditure of approximately $64 billion to $68.82 billion over the next 40 years in addition to the utility's current debt. I make this point to say that if you add $8 billion on to that bill, it is questionable whether the utility can survive in its present form.
I would like to conclude right now by saying I believe cogeneration can absorb some or all of this current capacity coming up with the nuclear reactors. Therefore, I will make my one and only recommendation to this committee: Ontario Hydro should be allowed funds for one year to meet its increased fossil fuel costs. During this time, the Ministry of Environment and Energy should request bids from all interested parties who wish to sell power to their local municipal electrical utility or Ontario Hydro at a set rate. These submissions should then be reviewed, and those that are feasible should be given power contracts at these rates, plus inflation, for the next 10 years. Any remaining capacity should then be transferred to Ontario Hydro, with sufficient funds to bring the needed reactors back online. While many details would have to be worked out to make this recommendation work, I believe it is feasible.
In the remaining time I would be happy to answer any of your questions. Moreover, Heat, Steam and Power and I would be happy to provide any assistance this committee may require. I want to thank you for this opportunity to submit this presentation.
The Chair: It's like a horse race, isn't it, trying to finish off in time. Actually, we have slightly less than two minutes per caucus. Let me begin with Mr Kwinter.
Mr Kwinter: Thank you for your presentation. Over what period of time would you anticipate non-utility generation would replace the power that would be lost by shutting down the seven nuclear reactors? How long would it take you to get it up to that?
Mr Gillette: One to two years. It depends on what kind of situation we're dealing with, but if the fuel is available and there are no apparent difficulties -- for example, this 15-megawatt plant -- a time scale of one year is not outside. It is pushing it a bit, but one year is possible, two years definitely. That's the advantage of cogen. Especially the CTUs at times can be put in quicker than the steam turbines, because essentially they're dropped as a set, a natural gas line is attached to the system and it just starts generating power.
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Mr Kwinter: You say that if fuel is available. Have you done any studies to see whether or not fuel would be available under that scenario?
Mr Gillette: Now are you talking about natural gas or biomass?
Mr Kwinter: You tell me.
Mr Gillette: With natural gas it's just a question of it depends how far the natural gas line is. Normally it doesn't take more than a year for them to send a line to the facility. Most times facilities that will be able to use cogeneration already produce thermal energy and are probably using natural gas. So there is no delay in getting the fuel there.
Mr Laughren: Thank you for coming before the committee. My question has to do with your one and only recommendation, as you put it. There's an assumption there in that recommendation, if I read it correctly, that the laid-up reactors will be restarted.
Mr Gillette: I would suggest it's not an assumption, but it leaves the option open.
Mr Laughren: "Any remaining capacity should then be transferred to Ontario Hydro with sufficient funds to bring the needed reactors back online."
Mr Gillette: Fair enough. I believe personally that there would be no need to bring them up online. As I said, when Ontario Hydro went open for bids, they got 6,024 megawatts, which is still there.
Mr Laughren: I appreciate that. All I was concerned about was that your last sentence seems to me anyway to imply that the reactors will be restarted, but earlier on in that recommendation you talk about 10-year contracts, and if they're going to restart them, it would be hard to justify the 10-year contracts.
Mr Gillette: I see the point. For example, if 3,000 megawatts were granted, that amount would be taken from the nuclear division and transferred over to the non-utility generators permanently. For example, that would allow this committee or a similar committee to look at the reactors in a worst-case scenario. So the worst one would fall off as that power capacity was filled, the next worst one and down the line. There may be a point where, for example, one reactor is quite good and it doesn't cost much to repair where it makes more sense to bring that online. You want to do that cutoff point. But as I said, this is a general statement and would have to be worked out with Ontario Hydro.
Mrs Johns: I too am looking at your recommendation. I'm interested in the independent power producers, if you will, being able to sell power to the local MEUs at a set price and I'm interested in that set price. Is that set price higher than the people of Ontario are paying for power now, or less? How do you see that?
Mr Gillette: These are going to be private sector projects. For the most part, cogen produces that three to four cents per kilowatt-hour, and for any project to get financing they would have to produce in that range. I would assume that the power purchasing price would be set at around five cents per kilowatt-hour, which is below the current price at which people are purchasing, but you've got to remember these entities are, by and large, making their savings in two ways. They will be producing power for themselves at cost and then they'll want to sell excess out for the most part. So these are additional revenues. For example, if they produce at four and they sell at five, this still leaves for the municipal electrical utility, for example, to make a profit on transmission. A three- to four-cent quote, and I can provide it for you, is from an Ontario Hydro document on privatization in 1993.
Mrs Johns: If someone produces power for themselves -- for example, a company comes in and produces power for themselves and then gives the balance out to the MEU, as you suggest -- do you see in your plan that they would have to pay a portion of the debt that has been incurred by the province so they would be liable for some of this debt that may be associated with Ontario Hydro, or do you feel they should just pay the cost of generating the power?
Mr Gillette: I think that considering they are helping already by filling in the $40 billion in future costs, asking them to absorb past debt they did not incur would frighten them away from the market quite quickly, whereas if this cost recovery is necessary, I would suggest it's better that it's on the actual transmission of the electricity to the customer rather than on the producer. That would be my suggestion.
The Chair: Thank you very much for your deputation, Mr Gillette, and for your written deputations as well. We appreciated that very much.
P.D. O'BRIEN
The Chair: Mr P.D. O'Brien, welcome to the committee. For the purposes of Hansard, if you would just identify yourself, then you have 20 minutes for your presentation and for questions and answers.
Mr P.D. O'Brien: I am a tradesman who worked for four years for Ontario Hydro. In that four years I couldn't point out deficiencies that a 12-year-old child would see -- not nuclear deficiencies but trade deficiencies. One of the things I saw was several instances of deliberate industrial sabotage. One involved an entire unit of the Bruce A nuclear power plant.
Ontario Hydro ignored the fact that the spent-fuel bay was not available and they allowed the first reactor there, number 2, to go critical. I pointed out to my foreman that deficiencies which rendered the bay unserviceable were known and reported for approximately 12 months -- I don't have the exact dates -- prior to Ontario Hydro requiring the bay. What I had pointed out was ignored. Then I went through every government agency I can think of here and nobody did anything about it but Energy Probe. I guess Ontario Hydro had to acknowledge eventually that my allegations were true.
The importance of nuclear power nationally and internationally is so great that I cannot see at any time Canada not having nuclear power reactors operating somewhere. If you're going to have reactors operating, then you'd better have somebody who is knowledgeable questioning how they're operated. What I've put down there is self-explanatory. You people, not me, have got to get the answers. That's all. It's as simple as that.
The Chair: All right. Thank you very much.
Mr O'Brien: If you have any questions, if you would like me to clarify anything further, I will do so.
Mr Laughren: I don't know where to start.
The Chair: You have five minutes, Mr Laughren.
Mr Laughren: I'll wander around. You use the word "criminality" in your suggestions that members of the committee need to investigate. You talk about industrial sabotage and so forth. Are the powers that be in Ontario Hydro aware of this industrial sabotage?
Mr O'Brien: I should hope they are, but of course they've denied that it took place.
Mr Laughren: So how do you know they're aware?
Mr O'Brien: Because I have told them. I've given affidavits. I've gone through every route I can think of.
Mr Laughren: Is this sabotage internal or external?
Mr O'Brien: Internal.
Mr Laughren: So it's by people working at the nuclear sites?
Mr O'Brien: Very definitely. It's by the supervision, and how high up the supervision level it went I have no idea. I can only speak of the people I had firsthand dealings with.
Mr Laughren: What would be the motivation of that kind of sabotage?
Mr O'Brien: To create extra work and overtime. To discredit the private contractor that was involved.
Mr Laughren: It would be sort of like in northern Ontario when I was driving on a highway up to Timmins and I saw a huge number -- as a matter of fact I found out later 1,500 guard-rail posts were knocked over by a private snowmobile that had been contracted out to the private sector, the road snow clearance, and 1,500 of them were knocked over and then of course would have to be replaced. Is that the kind of parallel to which you refer?
Mr O'Brien: That would be one instance, but can you say with assurance that it wasn't accidental?
Mr Laughren: No, I can't.
Mr O'Brien: Of course, 1,500, half a dozen or something --
Mr Laughren: I'm sceptical, but I can't prove it.
Mr O'Brien: That's the same thing. But Ontario Hydro could have proven it if they had spent one small fraction of the time they spent trying to rebut my allegations.
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Mr Laughren: All right.
Mr O'Brien: They don't want to acknowledge that it takes place.
The Chair: Thank you, Mr Laughren. That five minutes went by like the speed of light.
Mr John O'Toole (Durham East): Thank you very much for coming forward before the committee. Just to follow up on Mr Laughren's comments, you'd have a recorded event or incident which you have commented, I gather, with respect to suspected sabotage.
Mr O'Brien: I don't claim it's suspected. I claim it's 100%.
Mr O'Toole: You said you were with Ontario Hydro for four years. Were you an employee of Ontario Hydro or a subcontractor at that time?
Mr O'Brien: No, I was working for Ontario Hydro.
Mr O'Toole: What were the dates of that?
Mr O'Brien: It was 1973 to 1977.
Mr O'Toole: At that time, this was in the early phases of the Bruce stations?
Mr O'Brien: Yes.
Mr O'Toole: Who were the direct reports in site management at that time who you believe were aware of your concerns?
Mr O'Brien: G.E. Este was the site project manager and he wrote me a personal little letter, which unfortunately has gotten lost, which really was him imploring me not to proceed with this. I'm very sorry, but it was lost.
Mr O'Toole: That's unfortunate.
Mr O'Brien: It was on blank paper. It wasn't on Ontario Hydro --
Mr O'Toole: Not on letterhead. At that site it's my understanding that AECB have onsite personnel who are duly charged with the regulatory regime.
Mr O'Brien: First of all, I naturally went through Ontario Hydro. This is only the tip of an iceberg in terms of deficiencies, not major deficiencies but deficiencies that I was quite capable of seeing and saying that they were wrong and being correct in saying it, trade deficiencies.
Mr O'Toole: Did AECB respond formally or informally to any inquiry that you made of them?
Mr O'Brien: I would suggest, if you want to know precisely how they addressed that matter, that you ask them because they have the documentation. I don't have the documentation now.
Mr O'Toole: I might. For the purpose of the committee, if you could be more precise in the dates -- you said around 1977. Was it July or was it --
Mr O'Brien: Excuse me, sir. I don't mean to be rude to you or anything. If this is a parliamentary committee, you only have to ask these people for the literature or the correspondence they addressed to me and get copies --
Mr O'Toole: So there would be a record of Mr O'Brien's correspondence with AECB?
Mr O'Brien: I should hope so.
Mr O'Toole: Okay. We'll get it.
Mr O'Brien: You could also ask, I believe, a Gerry Rothschild of Dominion Engineering in Lachine, Quebec, because I pointed out that Ontario Hydro spent months reworking mechanical units that they supplied, and I think that after Ontario Hydro had reworked them, they weren't any better, but I'm sure that Dominion Engineering up in Lachine, Quebec, were charged with them.
Mr O'Toole: If you don't mind, I'll just move into a little more personal area. You were with Hydro as an employee for four years?
Mr O'Brien: Yes.
Mr O'Toole: Why did you leave?
Mr O'Brien: I left because of these -- I didn't really leave. I guess they laid me off. What happened was, after four years I got so exasperated that trivialities, things that should have been addressed when I brought them to the attention of my supervisors that weren't being addressed, that I sat down and started documenting them. I said, "If there is some reason that they're not addressed at Bruce, surely these people across the road should address them." They took great pleasure in seeming to deal in semantics and making a liar out of me, like they didn't address the thing. They didn't address my problems if they could --
Mr O'Toole: In your view, are the plants safe?
Mr O'Brien: That's what you are to decide. You are digressing now. I don't think the design of Bruce A, Bruce B and Darlington makes sense in any way for the simple reason that they are not independent units such as Pickering here is. In my first hours of employment there I had an orientation walk-round because I worked in the central fuelling area, and there is a duct that goes right underneath these reactors that's wider than or as wide as this room and maybe 40 feet high. I said to my supervisor, "If you have a problem, how are you going to isolate the reactors?" He said, "We'll have no problems." I thought if you bought a Rolls-Royce or a Cadillac and somebody told you that you'll have no problems with it, you'd wonder about their intellect or what they thought of your intellect.
Mr Kwinter: Mr O'Brien, in your written questions to us -- one of them I found interesting -- you say, "Who on this legislative committee has seen the report on the lead blanket left in a reactor steam system at Bruce Nuclear facility?" I should tell you that we may not have seen the report, but I think everybody on this committee was made aware that it had happened, and the explanation was that it was human error. You imply that this is "criminality, sabotage," and I'm just wondering how you knew that was in fact the case.
Mr O'Brien: I don't know that is the fact, but if somebody left a lead blanket in the engine of your car when they were servicing, you'd wonder whether it was just by accident, especially if you knew you were going to pay the people who were servicing it to rework it. That is the situation with Ontario Hydro. The employees of Ontario Hydro know very well, whether they leave one lead blanket or two lead blankets in there, that the work is going to be rectified. So if you close your eyes to the fact that industrial sabotage takes place, then you're going to have more of these things.
Mr Kwinter: My last question, Mr O'Brien. I'm intrigued by a statement you made at the very end of your written notes, where you say we should "ensure that the same investigators are not members of the secret society of Freemasonry." What is behind that?
Mr O'Brien: My supervisor at Bruce was a Freemason and he told me, "If you want to do anything around here, you have to be in the Masons." Since he was able to organize the sabotage of the spent-fuel bay and have nothing of that matter be publicized, I believe there was merit to his claim. Furthermore the police officer in Kincardine, when I went with an affidavit on that -- which is rather unusual. Normally they don't send police officers back to areas of their origin. It is considered internationally good policing not to send a police officer back to his origins. He was also a Freemason. I knew the man, I wouldn't say socially, but I knew him to speak to and knew who he was long prior to the fact that I went to him. He took the documentation that I brought to him, the affidavit. He took me into an inner office --
The Chair: Excuse me, Mr O'Brien. Can I break in just for a moment? I'm listening very carefully to the interchange here and I want to ensure that you understand that parliamentary privilege doesn't extend to witnesses. I'm sure Mr Kwinter understands, so I'd like you to be very conscious of any words you may use that might otherwise result in any kind of legal action beyond this committee. I just want to ensure, as I'm the Chairman of this committee, that you've been appropriately advised.
Mr O'Brien: I think if you're going to look at nuclear power as a source of energy, you'd better be prepared to put those things aside. I would think you people should consider that individuals coming before you are privileged, just as you are privileged within the Legislature, to speak facts whether they hurt somebody or not. May I continue now?
The Chair: You may indeed, Mr O'Brien.
Mr O'Brien: The man took the documentation that I brought there. He took me into an inner office. He studied it for one hour. He took no notes, asked no relevant questions and handed it back to me and said, "If that material was around here, somebody might see it." I went to the crown attorney in Walkerton and had been referred to him. He took no notes, asked no relevant questions, looked at the documentation for an hour.
The Chair: Mr O'Brien, I thank you very much for appearing before the committee. Thank you for your deputation.
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CANADIAN ENERGY EFFICIENCY ALLIANCE
The Chair: The next deputant, the Canadian Energy Efficiency Alliance, Bruce Lourie. Please, for the purposes of Hansard, if you'd be good enough to identify yourself and then proceed, we're in your hands for 20 minutes.
Mr Bruce Lourie: My name is Bruce Lourie. I'm the executive director of the Canadian Energy Efficiency Alliance. I'm not sure if my presentation is going to be as intriguing or exciting as the one that preceded me.
Mr O'Toole: They all are.
Mr Galt: You can try.
Mr Lourie: They all are.
Thank you very much for providing us with the opportunity to speak with you today. My comments are going to relate primarily within your terms of reference to item 2(b), the "economics and viability of alternative supply options," and item 2(c), a review of "environmental impacts of specific components of recovery" and recommend "means to address and mitigate these impacts."
I'll spend just a moment describing our organization. The Canadian Energy Efficiency Alliance is about to have our second annual meeting next week. We now have 33 members and those members include both of the major gas utilities as well as Ontario Hydro. We have financial institutions, energy service companies, manufacturers, consumer groups, environmental groups, independent power producers, the Municipal Electric Association, private consultants and municipalities, so we're a very broad-based organization with the single goal of trying to advance energy conservation across Canada. Most of our work to date has been focused in Ontario.
I think it's somewhat significant that we've managed to bring together many of the organizations that have vested interests in the issue relating to the restructuring of Ontario Hydro and the nuclear power issues. One of my jobs is to try to get our group to agree to say things publicly together. Most of what we say is based on two primary principles: (1) We need a more energy-efficient economy to provide competitiveness for the province of Ontario and for our manufacturers; (2) We need to improve energy efficiency in our economy to protect the environment.
What's interesting is that Ontario Hydro clearly faces a significant challenge right now in terms of what to do with the supply situation. We like to see this challenge as an opportunity.
My comments really are based only on three points. Although I think the strategy after the previous speaker is to speak the whole time and not have as many questions, I'll just raise my three points right now.
The first point -- I think this is often missed in the discussions, at least any of the discussions I've seen around Ontario Hydro -- is that the people of Ontario, I believe, are willing to pay for a clean environment. I think they're actually willing to pay more for electricity than they currently pay to have a clean environment. I think the reason we don't get this message out clearly is that there is a considerable amount of pressure being applied by a very small number of large, industrial users who clearly want lower electricity rates.
Right now, if we compare our electricity rates to those of our neighbours and those of our primary competitors, we will find that our rates are probably lower than most of the manufacturing jurisdictions with which we compete. If you look at the individuals on the street, the small businesses, you'll find there is a willingness to have a slight increase in rates if that means a cleaner environment or a safer environment for us.
My second point is that in Ontario and across Canada we have a vibrant industry right now that focuses on providing energy conservation products, technology and services. In fact the industry that we have here in Ontario is regarded worldwide as being one of the leading in terms of expertise. We have significant opportunities to capitalize on the expertise we have in this province and to not lose it in terms of actions that may result in reducing opportunities for energy efficiency. That is an important consideration in the decisions we make.
My third point, then, focuses on the concept I mentioned earlier of seeing this challenge as an opportunity. What we need to consider, as we're looking at supply options for Ontario Hydro, is energy conservation essentially as a supply option. So rather than having to build new power plants or necessarily having to revitalize all of the nuclear power that's been shut down in Ontario, we can actually make significant gains by saving energy in the province. I think we'll find that those savings which will take place over the long term will benefit consumers, small businesses and manufacturers in the province, and they'll certainly benefit the environment.
There are a few specific ideas I thought I would mention as well. I don't know if you are aware that Ontario Hydro is planning to issue a request for proposals for energy conservation. We provided some assistance to them. My understanding is that should be coming out in a couple of weeks.
One of the key issues with energy conservation is whether it's a utility perspective or the perspective of a government. There needs to be a long-term commitment to energy conservation and I'd like to think that those kinds of long-term considerations are made as the committee is dealing with this difficult subject.
There's a concept as well called stranded benefits and it's the opposite of stranded assets. What stranded benefits refer to is that in a utility system there are opportunities to save energy that will be within the larger benefit of the utility and of the customers. As you break up a utility into separate components, those benefits get lost because each individual component is just seeking to maximize its own profits.
What we have found and what we've come up with in our alliance, as a position we are advocating in this forum and will be in others, relating to restructuring, is that the province should be looking at some mechanism for regulated energy efficiency. It's important to remember who our members are: the large utilities, financial institutions and manufacturers in the province that are saying that they all want to see regulated energy efficiency in the province. The reason they want it regulated is because regulations provide a level playing field.
Perhaps I'll just read out from our organization what our position is. I'll provide this information to the committee in writing, not immediately following but within a short number of days. Our position is:
That the Canadian Energy Efficiency Alliance supports the establishment of a regulated mechanism to ensure that funds are available for energy efficiency, that the regulated mechanism be applied in a non-discriminatory fashion with regard to fuel type and that the regulated mechanism include comparable principles and requirements for the gas and electricity industries.
Perhaps some of those things relate more specifically to the bigger context of electricity restructuring, but I think it's hard to disentangle those given the job of your committee.
Those are my prepared comments.
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Mr Galt: You may be right. People may be willing to pay more for their electricity for a cleaner environment, at least in their home, but I've been told by the Ford Motor Co that from 1985 to 1995 they went from having the cheapest of the 17 regions where they produce cars to the 13th most expensive. When it comes to making cars or whatever widgets you want to make, it's the bottom line. If they're going to pay more for electricity, we may not have those plants here. It's a concern we have to have. That's bottom line.
You talked a lot about energy efficiency, and certainly the Ministry of Energy has a lot of regulations on that for various appliances. I'm curious, how do we compare with other countries in the world in the efficiencies of lighting, appliances etc? Do you have a position for us?
Mr Lourie: I can give it a shot. I think Ontario fares reasonably well within North America, although if you look at Europe, and particularly northern Europe, it's very easy to see there are huge opportunities we don't take advantage of in terms of energy efficiency potential. I gave a presentation earlier this week, and the opportunities -- depending on the product or sector, we could probably be using between 10% less for certain applications and up to 80% less for things like lighting. So we have huge opportunities and huge gains to make. The reason Europeans tend to be more efficient is because they have higher electricity rates.
Just getting back to your point on the Ford Motor Co, my point is there are several large manufacturers in the province that clearly want to see lower electricity rates, and I think that's a consideration, but I don't think that necessarily is at the expense of the 10 million residents of Ontario.
Mr Galt: When you talk about 80% efficiency improvement in lighting, are you taking our worst lighting here, the incandescent bulb, to something they're using, or what our average is here to what they're using?
Mr Lourie: If you took a standard lightbulb that's used in a building, like a long, fluorescent tube, say, in a commercial building or an office tower, you can purchase lights that are anywhere from 50% to 80% more efficient than those bulbs. They're on the market and they're cost-effective. They pay off in a very short period of time, in a year to two years.
Mr Galt: And the cost difference in original purchase?
Mr Lourie: They are slightly more expensive, but that increased price pays itself off within a year to two years.
Mr Kwinter: Mr Lourie, I commend your organization for what they're trying to do. There's no question that a kilowatt saved is just as valuable as a kilowatt generated. That's good economics. Have you done any studies as to what savings are potentially available in the use of electricity by using these conservation methods?
Mr Lourie: Personally we haven't undertaken those studies but they have been undertaken by others. It's not easy to answer that in one simple answer, but if you break it up by sectors and products, within the residential sector, say, there are fridges that typically would use 50% of the electricity of the average fridge sold, and those are on the market today. We tend to have a large number of products -- as I said, lighting -- that are anywhere from 50% to 80% more efficient, in the marketplace. I would say overall we could be using, within a fairly short period of time, 20% to 30% less electricity than we currently use. We could even do that -- just one study I was involved in -- simply through improving the energy efficiency standards and codes that we have.
It may be worth mentioning as well that we worked very hard for the past year and a half trying to prevent the Ministry of Housing here from reducing insulation levels within new homes in Ontario by 30%. It's actions like those, where clearly it saves people money and improves the quality of the housing stock and it's in everyone's best interests. We believe those kinds of things, those standards need to be increased, not decreased as was being proposed by the Ministry of Housing.
Mr Kwinter: In any of your studies, have you looked at price as a conservation tool? For example, you already mentioned that in Europe, because of the high cost, it limits the use. I know in Florida they don't sell electric kettles because electric power is so expensive there that nobody will buy them. It's possible you could actually get the price to go up, which would force people to conserve. Their overall bill over the year might be the same, but the savings would be offset by the fact that they would be more conscious of their electrical costs.
Mr Lourie: There have been many studies that indicate that's the case. That's right.
Mr Laughren: I want to pursue something I think Mr Galt started, the whole question of people being willing to pay for a cleaner environment through their hydro rates. Is there evidence of that? Has there been polling done that shows that?
Mr Lourie: Yes. Ontario Hydro actually has done that.
Mr Laughren: Whenever we talk about hydro rates going up here, it becomes a big political issue. You've heard already that the previous government had said they were freezing rates; the present government says they are freezing rates. Hydro says, "Wait a minute, we're going to talk about increasing rates." I think Hydro increasing rates is going to be dealt with at their next board meeting. I think the minister, just yesterday or today, I'm not sure when, said, "No, no, they're not going to increase rates," even though the minister doesn't have the authority to say no unless they issue what I think is called a government directive that says they can't do that. It's a strange world out there if people would be willing to pay more and Hydro wants to charge more, but the government won't let them. What's going on is a bit weird. I wondered if you saw any way through this series of contradictions.
Mr Lourie: It's difficult because there's a lot of conflicting information out there. On the point about Ford saying where we sit on the scale, I think if you look at most of the jurisdictions we would like to compare ourselves with, like New York state or Illinois or Michigan, we would find that our rates are actually lower. If we look at states like Tennessee and Mississippi, where typically they don't have standards for many things, you probably would find that their rates are lower. I think if we look at comparable jurisdictions in terms of the kinds of standards we accept for ourselves, you would find that our rates are lower than those of many of our competing jurisdictions.
I know Ontario Hydro has undertaken polls. I guess my point was that there's a big difference between asking Ford, Falconbridge, GM or Inco whether they would want rate increases or whether they would they'd be willing to pay for them for a cleaner environment, versus asking one of the 10 million residents of Ontario whether they're willing. I expect you would find more receptivity among the general population.
Mr Laughren: When you talked about regulating energy efficiency, you said in order to create a level playing field, and I couldn't help but wonder with whom.
Mr Lourie: One of the issues we have within our organization is the gas industry versus the electricity industry. Presently the gas industry has regulated energy conservation through the Ontario Energy Board. There is no such regulation for Ontario Hydro, as you know. So on any kind of regulation that would be applied to Ontario Hydro for electricity, the gas and electricity industries would like to see a similar kind of mechanism. Just generally it would set out rules and principles that whether you're an energy service company or a consultant, everyone would understand what those rules are and be able to apply equally across the board.
The Chair: Mr Lourie, perhaps you could just indulge me for a moment with a response to a couple of questions in terms of some of the conservation approaches we're taking. You referred earlier, for example, to lightbulbs. I must confess that I went to a local hardware store not long ago looking at some of the new energy-efficient bulbs and I have to tell you that I was stunned by the price. In your comment to this committee, you indicated the cost differential is offset by the energy savings within a year or so. I have to tell you that my rough figuring, and I don't profess to be an Einstein, played out well in excess of 10 years and beyond when I did the figuring, and it took me quite by surprise. I wonder if you care to respond to that.
Mr Lourie: My reference to one to two years was for commercial lighting in commercial office buildings. For residential lights, it would probably be more like a seven- to 10-year payback.
The Chair: My figuring wasn't too far off, then.
Mr Lourie: You're correct.
The Chair: In terms of energy efficiencies where you're trying to encourage retrofitting of existing residential housing stock, to your knowledge, at this point are there any utilities or any agencies that are offering any kind of economic incentives?
Mr Lourie: For residential retrofit?
The Chair: Yes. Let's suggest even window replacement, for example.
Mr Lourie: Anywhere or just in Ontario?
The Chair: I'd prefer to stay in Ontario, although I'm happy to deal with other provinces.
Mr Lourie: I think the gas utilities have programs where they will go in and wrap hot water pipes, for example, or put blankets around hot water heaters, things like that. There aren't incentive programs per se where you get so much money if you purchase such and such a product.
The Chair: Mr Lourie, thank you very much for attending upon the committee. We appreciate your evidence.
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EPV CANADA CONSULTANCIES
The Chair: The next witness is EPV Canada Consultancies Ltd. Would you be good enough to come forward and, for the purposes of Hansard, identify yourself when you're ready to start.
Mr Laszlo Jarmai: My name is Laszlo Jarmai. I'm president and CEO of EPV Canada Consultancies Ltd. EPV stands for energy photovoltaics and we are into solar power.
Before I get down to the written presentation, I have received an addition of five minutes, so I thought I would say a few words about why this presentation is really being made.
Until the Ontario Hydro -- I call it a nuclear anomaly -- happened in July, I was the principal proponent of not using solar power anywhere where there is a central energy supply grid, which includes of course most of Ontario. Actually, that's the only invention of my own that I claim, the economic principle for economic solar power.
What EPV Canada is all about is economic solar power, and the key word is "economic." We are not really interested in everything that has to be subsidized in any shape or form by anyone.
It was actually after the Ontario Hydro nuclear anomaly happened that some of my friends who knew what we are doing in countries where there are insulation figures of about 2,000 sunshine-hours per annum, which is where this should be done, started knocking on our doors to see what could be done here in Ontario. So everything I am saying here, please take it with that in mind.
We are happy to do anything we can do. I think we have a fantastic opportunity, but Ontario is not a primary market for solar power; neither is the United States, by the way, and neither is western Europe where most of the manufacturing is taking place.
Let me read my statement to you very briefly and then I am going to make a few more comments.
Thank you for the opportunity you have provided for me to make this representation to you. First of all, I should like to provide you with some information about myself, what I am and also what I am not. I hope this information will assist you in the evaluation of my representation.
I am a water resources development, that is, hydro, engineer, with more than 40 years of international experience that has been gained on four continents. During some of this time I had been a senior officer of UNDP, the United Nations Development Program. At present, I am president and CEO of EPV Canada Consultancies Ltd, an Ontario corporation that signed a major joint venture agreement on the establishment of a 25 megawatt per annum solar power generating facility in the Philippines during the Team Canada 1997 trade mission to Asia led by the Right Honourable Jean Chrétien, Prime Minister of Canada, and accompanied by all 10 provincial premiers, among them the Honourable Mike Harris, MPP, Premier of Ontario. That's what I am.
What am I not? I am not a nuclear engineer, neither am I a nuclear scientist. As a result I do not intend to have this representation interpreted as an expert testimony on Ontario Hydro's nuclear affairs. I am not some kind of solar zealot either who would try to use the platform of these hearings to suggest replacing nuclear power in Ontario with non-conventional energy sources, at least not in the foreseeable future.
What I am, first and foremost, is a reasonably experienced Ontario taxpayer who feels very uncomfortable with the estimates of $5 billion, $8 billion or $12 billion that we are supposed to fund as a province just to restore a rather iffy nuclear status quo in Ontario, as has been reported widely by the media. I believe that before we spend such an enormous amount, we should all look around at whether some of these amounts could not be spent on something much more progressive which could provide us Ontarians with an investment towards the future.
One of these potential progressive investments would be in the area of solar power development, and this is what this representation is all about. I firmly believe that for a small fraction of the billions mentioned above, we could establish for Ontario a global lead role in that field in a relatively short period of time, using resources that are already available to us or easily accessible.
The most important such resource that is easily accessible to us is the state-of-the-art solar technology of EPV Inc, our sister company in Princeton, New Jersey, USA, and its Canadian owner-president, Dr Zoltan J. Kiss. After several decades of research and full-sized field trials, EPV's solar technology has been acknowledged as the best and most economical such technology available by no less an authority than Mr Federico Peña, Secretary of Energy for the Department of Energy of the United States government, in a press release dated May 14, 1997, a copy of which you will find attached to this representation. That's the last page in the material I handed out.
I am pleased and proud to inform you that EPV's solar technology, which is celebrated by the DOE in the attached press release, is the same technology that we, EPV Canada, will be using in the joint venture project in the Philippines that I have referred to on the previous page. This technology could be made available to us here in Ontario relatively easily and it is this availability that this representation is based upon.
I recommend to this select committee, and through it to the government of Ontario, to use this technology as the basis of a proposed solar industry in our province. This industry in turn could achieve the global lead role that I have referred to before, embarking on an enterprise that would put us to the cutting edge of solar power development on earth and would preassign us a prominent place in the solar millennium that follows.
The framework of this representation and the time limits imposed on it would not allow the introduction of the details of a proposed modus operandi, how this could be achieved. I am, however, prepared, indeed very much interested, in the provision of such details if called upon to do so.
In closing, I would like to direct your attention to an article of mine written on July 14, 1997, which is also attached to the material that you have, with the title Towards a Solar Millennium. The contents of the article explain themselves, more or less, but I would be delighted to answer any further queries if called upon.
I should like to end this representation with a quote by Dale Carnegie, the author of How to Win Friends and Influence People: "If you have a lemon, make lemonade."
I should like to add a few explanatory notes to the last page, to the Department of Energy press release of the United States of America. If you look at that text, it will show you that to establish a solar power industry anywhere is not easy. If you look at the dates in that press release, it says in the second paragraph, "DOE has been performing cost-shared research on thin films with EPV and its predecessor company since 1978," which means the Department of Energy had been the partner of our sister company for 19 years before this press release came out.
If you look at the extended business card of mine, which is on the third page, it shows you a picture of a solar-powered generating plant in Birmingham, Alabama, which was built in 1985 and partially funded by the same Department of Energy.
The question is, why did this press release not come out either in 1978 or at least in 1985? Without being too long about it, it's because there was too much resistance against solar power, and if you look around the world, there is still too much resistance against solar power, for one reason: People have the impression that it is not economical. This is not true. If you select the right circumstances, solar power can be very much economical.
Here in Ontario there are not too many of those circumstances that are available to us, but there are some. I'm going to mention to you right here a very worthwhile program of Toronto Hydro. It was announced in the media on July 10, 1997, that they have started a pilot program where they would provide an interested customer -- industry, condominium, whoever -- with a reversible meter. If they installed the solar modules at their own expense, they would really buy their power, what they produced in excess.
If you are looking at it, and this is something I don't have to tell you because you probably know already, the only reason this program didn't take off yet, because there are many interested people, is because they could not get a solar module at a decent price. That's what we're coming down to. Until we have to import solar modules from the United States, they are simply too expensive. You could buy them if you go to Canadian Tire. They say you can order them in advance and in two weeks they would deliver them to you at the price of $22 per watt. EPV Inc is producing them in Princeton, New Jersey, right now for under $2.50. What the spec says is that by 2002 they are going to do it under $3 per watt. This is incorrect; we are doing it right now for under $2.50.
We are talking about a tenfold price increase that the various middlemen have put on top of it by the time it gets to the consumer. The selection that I hope this committee will make, and by suggestion the Ontario government will make, is to have a solar module manufacturing capability right here, preferably in Toronto, but somewhere in Ontario. That's all I wanted to add.
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The Chair: Thank you, Mr Jarmai. We appreciate that very much. There's time for one question from each caucus, beginning with Mr Kwinter.
Mr Kwinter: Just so I'm clear, when you started you said you didn't think that solar panels are really very practical in Canada, the United States and Europe. Are you advocating that we should set up an industry so we can provide solar panels to the rest of the world where it does make sense?
Mr Jarmai: In about 65% of the world, it does make a lot of sense. There are only two figures that you have to take into consideration when you want to put some kind of economic handle on solar power. One is the figure of installation. That is the number of annual sunshine hours which any geographic location has. If a location has more than 2,000 sunshine hours per annum, which means an installation figure of 2,000, that place is eminently suitable for the use of solar power, whatever the other sources of power supply might be. We have here something like 1,400 to 1,500, so for that reason alone we don't qualify.
But there is a second consideration, that if you don't have a central power supply grid -- solar power can be economical today here in Ontario, in cottage country, for instance. It's obvious that the moment you don't have to compete with the Ontario Hydro grid, you are economical today, if you can produce and provide the solar modules at a decent price. Under "decent price," I'm actually saying $2.50, which means something like C$3.50, per watt. A solar module represents a certain number of watts. In the United States they do it in sizes of 40 watts per module. In Europe we have gone over to 50 watts because of the metric system. I like to go metric because it makes more sense.
If you are looking at the perfect price you can get a solar module for from the manufacturer -- this is the dollar-per-watt figure, the second figure you have to look at -- you can get it from EPV Inc in Princeton, New Jersey, at US$2.50 per watt, at the factory. Anything else on top of it is profit made by somebody. The $2.50 figure already includes one third profit for the manufacturer, so that doesn't count.
If we could produce this here, and I'm sure we could -- the inventor, the owner of EPV Inc, is as Canadian as we are. He got his doctorate here at the University of Toronto, except what happened to him -- he's a friend of mine -- is that he was grabbed by RCA right after he got his doctorate and they took him down to Princeton and they put him to work on the NASA space program. He has been doing it there ever since. His mother still lives here, north of St Clair, and he still comes home and travels on a Canadian passport. He never became a US citizen.
This could be done relatively easily. Let me put a dollar figure on it, and please compare that with the $5 billion, $8 billion or $12 billion: We are talking about US$10 million for which we could establish it.
Mr Laughren: You'll have to bear with me. I'm just a county boy from the north and I think I'm missing something here. The solar panel is not linked at all to the Ontario Hydro grid, right?
Mr Jarmai: No. It doesn't have to be.
Mr Laughren: It's standalone, and somebody who is building a cottage in the wilds of Muskoka -- as though there were any wilds up there any more -- could use solar panels because it's only for summertime use, right?
Mr Jarmai: Exactly.
Mr Laughren: What I want to know is, what the hell is wrong with the private sector? Why aren't they doing this?
Mr Jarmai: I don't know. I have no real handle on this.
Mr Laughren: You don't know? But you're not a country boy from the north.
Mr Jarmai: No, I'm a field engineer. I may not look it, but I spent 40 years in the field and I was a project manager for various technical assistance agencies, including the United Nations.
I am absolutely on your side on this. I don't know why. The only reason I could think of is that solar power anywhere in the world is either handled by governments or by huge, and I mean huge, private enterprises. In the United States our principal competitor is Enron. In Germany it's Siemens.
Mr Laughren: But that's not government.
Mr Jarmai: No, but let me take one example, Enron. Enron was all out to buy EPV Inc for one purpose only, to kill it, because it hurt their other energy supply products. Zoltan, who happens to be my good friend, told me they had a due diligence exercise at his plant for a year and finally he had to throw them out because they were not interested in doing anything with him. They just wanted to find out what he's all about. It is not easy.
Mrs Johns: I just wanted to thank you for this interesting tidbit that I can take home to my young boys, that the robot that's on Mars is solar-generated. I didn't know that. That's pretty interesting, and we'll certainly use that.
I need to get to the bottom line of cost here. You're telling me it costs $2.50 per watt to make this panel. You're telling me it would cost $10 million to start the manufacturing here. What is the bottom line to the person who puts that in, compared to the hydro rate of about five cents per kilowatt-hour? Compare them for me.
Mr Jarmai: With a hydro rate of five cents per kilowatt-hour, we are not competitive. It's as simple as that. That's why I have -- this is the only thing I've invented in this whole thing -- the guiding principle for economic solar power. I invented it long before the Ontario Hydro anomaly started. At that time, if you had asked me the same question, I would have said, "Let's forget Ontario."
The only reason I'm here now and talking to a lot of people in Ontario is because there is a possibility of doing something here. In addition to that possibility which we would be doing here in Ontario proper, we would be able to base a whole export-oriented industry -- and this is where I'm answering Mr Kwinter at the same time. We have a huge potential market in the world where solar power is economical today.
Mrs Johns: But at 1,400 or 1,500 hours of sun supply, we couldn't actually produce enough solar power to keep us in electricity during the year, so we would have to have a last resort, which would be hydro and the wires and all those things we have now, so there would be no cost saving.
Mr Jarmai: Let me turn this around. We would be complementary to hydro, not hydro to us. The Toronto Hydro initiative I mentioned is supposed to do exactly that. I should have brought a copy of that article with me from the July 10 number of the Toronto Star.
There is this house at the bridge at Richmond that is pioneering in many respects, but also regarding solar. That's where they started it. They are installing a number of solar modules and they get from Hydro a reversible meter. It meters their use and it meters when they don't use the power and they feed it back into the grid. In cottage country this could be quite substantial, where somebody is using that cottage two, maybe three months a year at the most, and the sun shines for 12. If we do install this kind of reversible meter, that's because the module is going to produce electricity whether somebody is there or not.
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My daughter has been working in Japan for the last eight years and we keep visiting her. The Japanese government is spending an enormous amount of money because they don't have any oil. Every little Japanese household that is interested can get a subsidy from the government to put it on their roof. If you ride through areas in Japan, they have a program which does 70,000 roofs per annum. It's enormous. It's the largest such program in the world, unless Bill Clinton manages to get 10 million roofs in the US, but he is very much at the beginning of it.
This is something we can do if we have a decent supply of modules here in Ontario. Without that, it definitely won't work, because the middlemen are going to buy it.
Let me give you one more example, in the Philippines. We are doing a concept called MIPPP, manufacturing integrated photovoltaic power project. What that project is going to do -- the power station is going to own the solar module manufacturing facility. We are installing a manufacturing facility first, and then for five years that manufacturing facility will do nothing else but produce modules for the power station. So we eliminate the middleman on both sides. That's the way to make it economical.
The Chair: Thank you very much, Mr Jarmai. We appreciate your attendance upon the committee.
Just before I go to our next witness, the Chair has just learned of the death of one of Mrs Fisher's in-laws. I know the committee would want me to express our condolences to you and your husband, Mrs Fisher.
SAC INTERNATIONAL
The Chair: Is Mr Ahmad Solomah here? Please come forward.
Dr Ahmad Solomah: My name is Ahmad Solomah. I am the president and CEO of SAC International, a company in Mississauga. My PhD in nuclear engineering, from North Carolina State University in 1980, primarily dealing with radiation and radioactive waste, has been widely recognized by DOE in 1978-82. I won several prizes for my work in North Carolina. I have been working with nuclear waste and nuclear issues since 1974, so I have about 23 years of experience in this field. I was a guest scientist with the KFA nuclear research centre in Juelich with Professor Merz, who was the chairman of nuclear safety of Germany, I worked with Atomic Energy of Canada and I worked with North Carolina State University. I am politically active. I was the PC candidate for Mississauga Centre in the June 1977 federal election.
I wrote a letter to Mr Shea about four weeks ago, after the problems of Ontario Hydro. Based on my experience in many countries, I gave him my recommendation: that this government should establish an authority under the name of Radiation Protection Authority. When I talked to Mr Sterling a year ago regarding low-level waste, which was and is still a big problem here in the province, he sent me back a letter saying he had no interest in making a legislative body to control radioactive waste. But as long as this government doesn't have the upper hand in Ontario Hydro, we will have a lot of problems.
I will give a German example. The German nuclear program is one of the best in the world by any standard you may look at, better than the Americans', as a matter of fact. During Three Mile Island, the people who solved the problem were Germans. I'm telling you this based on my experience. It was a fresh reactor, 50 days operating the reactor by the General Public Utility in Harrisburg. The meltdown occurred in about 29% of the core and they couldn't dismantle it. They had to get German expertise. Once you shake some shape that you don't know, you can achieve criticality and an explosion will take place. They had to get experience from Germany.
The German program also solved Chernobyl, because the German program has the most extensive experience in graphite reactors. The graphite reactor in Chernobyl was burning at about 1,800 degrees Celsius and nobody knew what was going on. The Germans solved the problem.
The German program for waste management and for nuclear energy is a complementary program between the federal government in Bonn and each province. I have an example with Lower Saxony, where the low-level waste site has been decided on. The Lower Saxony environmental office was in charge and is still in charge. In Bavaria, when they made their plant it was decommissioned after they built it. They never ran it by the ministry of the environment of Bavaria. The ministry of the environment of any province should have the upper hand.
Here I wrote down the functions of that office:
Monitoring and controlling the environmental radiation of nuclear power and any other nuclear facility, whether it is manufacturing of uranium oxide or decommissioning or decontamination. The province should have the upper hand in monitoring and controlling this, not the producer. You cannot accuse the producer and make him the plaintiff at the same time. They must be accountable to some body of the government.
The same office should be responsible for issuing the licence under AECB, because AECB has the mandate from the federal government. The provincial government should have an office to work with the federal government to implement the AECB act.
The other one has been ignored even by the report of Carl Andognini; I didn't find anything in it about decommissioning. He talks about recovery of the assets of Ontario Hydro. How about after 20 years? What will happen to those reactors? You have to retire them.
I will show you the data from the states involved with nuclear. North Carolina's low-level waste management program: They spent over US$110 million and they couldn't get a licence for a disposal site outside of Raleigh because the office of radiation protection in Raleigh demands too much information from the contractors.
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Look at the white bars. The white bars are the amount of waste coming from operation. The first reactor to be decommissioned in the United States will be in the year 2015. The decommissioned volume will go very high, from almost 60,000 cubic metres to -- let me focus this; it's fuzzy. By the year 2030, almost all nuclear energy will be phased out in the United States. North Carolina had a plan in 1978 to build four units, 900 megawatts, Westinghouse reactors. They were successful to build only one, because the public were against it. By the year 2030, all the operating reactors in the United States will be phased out and you will end up with a huge volume of waste. Ignore the high-level waste which comes from the core and we expect that by the year 2030 in the United States there will be over 300,000 metric tons of heavy metals, just uranium, uranium oxide.
This flow chart shows you what the radiation protection authority will do. Working with AECB, it will issue licences for operation, for decommissioning and for the storage and disposal. This should be under the Ontario Ministry of Environment.
I will show you how we can tackle Ontario Hydro. As far as I'm concerned Ontario Hydro has no control from outside, AECB or any other agency, because the government of Ontario doesn't have authority to do anything, just watch and wait, and then we have problems and we talk about it.
This will be the RPA, under the Ministry of Environment, this is AECB, this is Ontario Hydro Nuclear, this is Ontario, any other nuclear facility, like Port Hope, which is a big problem, with the cooperation of Environment Canada and any other agencies.
I would like to leave the floor now and you can ask whatever you want to talk about.
The Chair: Thank you. We'll begin the questions with Mr Laughren. You have about four minutes each.
Mr Laughren: Thank you. You will forgive me if I have some problems with your recommendation, for a couple of reasons. First, I can recall when the province of Ontario was responsible for safety, including radiation, in our uranium mines, and the bodies were stacked up -- stacked up -- and the counting was being done before the Ontario ministry ever lifted a finger to do a thing about it. That's when the Ham commission was appointed. It was disgusting. It was criminal. Between the Ontario government and the uranium mining industry, there should have been people go to jail, but there weren't. All that happened was that people died. So I'm not convinced at this point in time that the Ontario government, given the way the Ministry of Environment has been gutted in the province in the last two years --
Mr Galt: Oh, get a life.
Mr Laughren: What do you mean, get a life? I'll have my piece, if you don't mind.
It has been gutted, and I'm really worried that if we say to the Ministry of Environment, given the climate in Ontario today, that they're responsible for radiation in our plants, nothing will happen. I would much rather leave it with the AECB, and I'm not that happy with AECB either. I'm wondering why it is that you think AECB cannot do the job and the Ministry of Environment would do a better job.
Dr Solomah: I'll tell you why. Any nuclear facility has some data collection, the good data and the bad data, doesn't it? I'm a scientist. The good data will be published for AECB to renew the licence. The bad data, nobody will hear about it. I know this for a fact. I did some work for Ontario Hydro in the 1980s regarding plutonium processing in their Candu reactors. I worked for AECL. I worked for many government agencies. I know how the data are manipulated.
If Environment Ontario has some people at the site getting the raw data, right away, with AECB, they can put the decision together. But as long as you leave it to the people at Ontario Hydro to renew their licence, the good data will go to AECB, AECB will issue the renewal and we get stuck. And wait 20 years; you will see the problem of decommissioning. The decommissioning problem will be very expensive for every unit which is operating right now.
Mr Laughren: I respect your right to have your opinion.
Mr O'Toole: I just wanted to follow up on your comment with respect to what is actually the case today. We had a very important presentation by Dr Nolan from the Canadian Institute for Radiation Safety, and he came up with a couple of -- "no one there to crack the whip," is the reference he used. Really, he came down pretty hard on AECB.
I personally have some difficulty with the government, on its own, taking that kind of authority. I believe in the arm's-length regulatory process. What should that process be if it isn't the Ministry of Environment? The AECB, according to Mr Nolan -- he was clear. He said the AECB is supposed to be looking after nuclear safety. Who has the whip?
Dr Solomah: Oh, no. AECB is not looking after the safety. AECB is looking after the licence for operation.
Mr O'Toole: Nuclear safety.
Dr Solomah: No, there is no such thing. The United States has NRC, the Nuclear Regulatory Commission. It's a more comprehensive body than the AECB because they have people at every nuclear reactor.
Mr O'Toole: So does AECB.
Dr Solomah: Well, did AECB do anything about Pickering till everything cracked down?
Mr O'Toole: Well, they're there. Their onsite people have been at every site we've been at.
Dr Solomah: This is the province. But in the States -- I know Brunswick. I did some work for Carolina Power and Light, while I was working with North Carolina. They shut down Brunswick within 24 hours, because the NRC was in control. AECB, as far as I'm concerned, doesn't have the authority the NRC does in the United States. I would like to see a body here under the government of Ontario in control of these reactors, with AECB, to protect the environment of Ontario. This is the prime concern.
Mrs Fisher: Just a quick question. We'll leave your suggestions, I'm sure, for further discussion, but with regard to the public hearing process that took place over the past winter across Canada on high-level waste storage, which we have to look at in terms of decommissioning and long-term costs, do you or don't you support the proposal with regard to deep ground storage in the Canadian Shield of high-level, long-term-storage waste?
Dr Solomah: I do, because I did a lot of work for AECL on this problem. I support it.
Mrs Fisher: Do you think AECL has AECB support on that?
Dr Solomah: It has, but it comes again to the province, where you will bury that waste. You can't leave AECL and AECB, Ontario Hydro, alone.
Mrs Fisher: How do you separate the issue of the Power Corporation Act, where no power belongs to the provincial government -- except for indebtedness, it seems; that's the only time you get to stick your nose in and say, "Hang on here." How do you see the Ministry of Environment being able to have any more authority than what the Power Corporation Act does over Ontario Hydro today?
Dr Solomah: With AECB. The Ministry of Environment will work with AECB.
Mrs Fisher: Then maybe it should be the AECB.
Mr Kwinter: I just want to pick up on what my colleague Mr Laughren had to say. I'm having difficulty with your proposition that this should be a provincial jurisdiction.
Dr Solomah: Not alone; with AECB.
Mr Kwinter: What I'm saying is that it would seem to me that the major issues confronted with nuclear waste are global. They really are global, because the problem doesn't recognize provincial boundaries. If there is a problem, it expands all over the place. It would seem to me that you would compound the problem by putting someone between the operator, in this case Ontario Hydro Nuclear, and the Atomic Energy Control Board.
I would think that a better solution, if you're not satisfied with what AECB is doing, is to strengthen their regulatory ability to make sure they have the power to do the things you think they can't do and that only a provincial agency can do, so we have uniformity, not only uniformity in Canada but uniformity globally so we can use the collective experience and knowledge of everybody who's in the nuclear business to make sure we address this problem that everybody acknowledges is going to be a serious problem in the future.
Dr Solomah: I disagree with you for one reason: Somewhere, this reactor should be built, somewhere, and that "where" is the government; local government should have the upper hand on the decision.
In Sweden, they shut down reactors because of referendums, in one area. The same in Germany. Out of 22 reactors, I think they have only 10 right now because the local government said: "No, we don't need nuclear energy. There are too many hazards from these reactors."
A plant in Wackersdorf in Bavaria was shut down even before it started after completion. A reactor in North Rhine-Wesphalia was shut down after they spent 6 billion marks. The local government has the authority, in accordance with the federal. We should say: "These are the rules. If you like it, fine; if you don't like it, make a referendum." The referendum will go.
But we don't like to see Ontario Hydro and the AECL in control of these nuclear issues. You, as legislators here in this building, should have the upper hand and say: "This is my province, this is my environment. I am responsible for its protection."
Mr Kwinter: The local government has the ability to not fund it. If they don't fund it, it doesn't get built. The federal government is not going to build it; all they're going to do is regulate it. It seems to me that if you have a problem with the regulator, we should address that problem, as opposed to setting up another regulatory body that's going to be a patchwork. You're going to have one in Ontario, you're going to have one anywhere else that there are nuclear reactors, and you're going to have the Atomic Energy Control Board regulating them, when it would seem to me that a more efficient way of getting uniformity of standards would be to have the AECB do it all.
Dr Solomah: Everybody knows the laws for disposing. We know the limits, the high, the doses calculated from the processing side, from operating the power plant, but we need the local government to have the final decision. This is my advocacy for this committee.
The Chair: Mr Solomah, thank you very much. We appreciate your deputation and the submission of your information for the committee.
We have exhausted the deputations for the moment. The committee will take a recess and will return. We'll adjourn until 7 pm this evening.
The committee recessed from 1744 to 1859.
The Chair: The committee is in formal session. To remind members of the agenda, tomorrow morning at 9 am we have the continuation of briefing by Ontario Hydro. You may recall that Patrick O'Neil was giving evidence; we will continue and complete the deposition tomorrow. I think Ms Ng is also up. She was the next one. She was part 3, actually, to begin.
In the afternoon, the deputations will include the township of Bruce, and then Ernst and Young. I would ask that members bring their Ernst and Young report. I think that will be very helpful.
On Wednesday, we will adjourn to Pickering for the visitation to the site and then for the public hearings. The public hearing will be held at St George's Anglican Church, and we'll give you the information of where that's located.
Mr Galt: Will you provide a few words for us in the appropriate spot?
The Chair: We may need it by that time. If you and Mr Laughren continue your exchanges, we will do that.
Then we will adjourn, the next day, to Darlington for our site visit there. That's this week's task before us.
This evening, we have another deputation from TransAlta. Then the committee will go in camera for closed briefings. Those briefings will deal with the issues of beginning to assemble much of the information we've dealt with already, how we propose to deal with it, other areas we wish to explore. We need to have at least a couple of hours of some work in that regard.
You will also have tabled before you a letter that was sent to me on Friday of last week by the chairman of Ontario Hydro. So you know what happened as a result of that, the follow-up discussions from Ontario Hydro asked for an appearance before this committee as early this week as possible. They were then contacted and advised that we would be able to find some time today, but we could find significant portions of time tomorrow. We were advised that on neither of those occasions was the chairman available. So the time remaining for this week -- as you know, I've just gone through our agenda -- is simply not available for Mr Farlinger to come before us this week. In light of next week, it will now likely have to be the week of the 24th before we'll be able to see Mr Farlinger.
Mr Laughren: I think you meant the 17th, didn't you?
The Chair: No, I meant the 24th. It may be that far ahead. I'll explain why when we go into closed session. That may be the date, but we'll decide that when the subcommittee, probably the entire committee, meets when we go in camera a little later this evening. That's to make it very clear for the record. Rick, is there anything else I've forgotten in that, or is that generally what you understand?
Mr Richard Campbell: That's correct.
The Chair: So that does reasonably reflect the contact with Ontario Hydro, the fact that we did offer time early this week but it was not able to be accepted by Hydro.
TRANSALTA
The Chair: With that information in mind, we will then proceed to our next deputation, which is TransAlta. Mr Chuddy, welcome to the committee. Would you be good enough to identify yourself and your colleague? Then we're in your hands for 20 minutes for presentation and questions and answers.
Mr Steve Hodgkinson: Just to flip-flop for you, I'm Steve Hodgkinson, the director of business development for TransAlta, and with me is Barry Chuddy, who is the director of independent power development for the company.
I'd like to give you a brief overview of who TransAlta is and what our interest is. TransAlta is an investor-owned energy company, with assets of over $5 billion, headquartered in Calgary and operating through two principal subsidiaries: TransAlta Utilities Corp and TransAlta Energy Corp.
TransAlta Utilities owns and operates electricity generation, transmission and distribution assets supplying more than two thirds of the electric energy needs of the province of Alberta. TransAlta owns net generating capacity of about 4,500 megawatts of electricity, the vast majority of that being coal-fired thermal plants. TransAlta has been the electric utility in Alberta since 1911.
TransAlta Energy is in the business of electric and thermal energy supply, gas and electricity distribution, energy services and energy marketing in Canada, New Zealand, Australia, Argentina and the United States. TransAlta Energy holds a two-thirds interest in a company called TransAlta New Zealand, which is the fourth-largest electricity distribution company in that country. TransAlta also holds interests in eight independent power projects: three in Ontario, two in New Zealand and one each in Australia, Argentina and Alberta. The energy services and energy marketing businesses operate in Canada and the United States Pacific Northwest. In those locations TransAlta is among the top 20 energy marketers in North America.
TransAlta began working as an independent power producer in the late 1980s. Since that time we have built three cogeneration plants, representing an investment of over $250 million in Ontario. We employ a staff of over 60 people in Ontario and produce 230 megawatts of electricity that's sold to Ontario Hydro. It represents an alternative energy source for our thermal energy customers who are major employers within Ontario.
We have a plant in Ottawa that produces approximately 70 megawatts of electricity and drives what is effectively a district heating system, providing all the thermal energy requirements to a campus of seven health care facilities in Ottawa. Through this system our most recent customer, the Perley Hospital, managed to build a brand-new hospital without the cost of building a central heating plant.
In Mississauga we have a cogeneration plant that produces 110 megawatts of electricity and provides services to the McDonnell Douglas manufacturing plant, which is now Boeing, at Pearson International Airport. Both the Ottawa and Mississauga plants began operations five years ago, in 1992.
Our most recent plant was commissioned last December in Windsor to supply 50 megawatts of electricity to Ontario Hydro and steam to Chrysler's assembly plant. That's the plant where Chrysler produces the majority of the minivans that you see on the road today. As part of this project, we took over operation of Chrysler's existing central steam plant, including all their existing staff, allowing Chrysler to achieve significant operating cost savings.
These savings helped the Windsor plant position itself competitively against their American counterparts for Chrysler. Within Chrysler, and many industries, there are competitions between plants on both sides of the Canada-US border for where different products will be produced. The savings that were produced in Windsor allowed Chrysler to continue and upgrade their facility there.
These cogeneration plants have proven, over the last five years, to be extremely reliable and have an availability in excess of 96%.
Two years ago we opened a business office in Ontario, recognizing the marketplace and the opportunities that exist here, and began working with a number of industrial customers and municipal utilities. Since that time we have formed a partnership with Consumers Gas Energy to look for synergies between gas and electricity distribution functions as a way of helping municipal utilities and the gas utility to reduce costs.
We have recently signed an agreement with St Catharines Hydro to provide electric load management, billing services, meter reading and collection services, and are having similar discussions with numerous other municipal utilities. These activities, in addition to the obvious benefit of cost savings, we believe will help position municipal utilities for the coming changes in the electricity business.
I'd like to call on Mr Chuddy to just outline our position before this committee.
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Mr Barry Chuddy: TransAlta's purpose before this committee is to address alternatives to Ontario Hydro's nuclear recovery plan. It is our view that the current nuclear difficulties being experienced by Hydro represent an opportunity for the province to take a positive step towards an electrical industry that will introduce prices set through competition. We believe there is an opportunity to explore options that can accelerate the pace of industry change as part of the recovery plan. Rather than accepting the view of spending billions of dollars to perpetuate the current technology and monopoly, we encourage the committee to examine these alternatives and take a bold step towards a competitive industry.
This committee has heard from the Independent Power Producers Society of Ontario, and others I expect, about all the advantages of cogeneration and independent power. We do not propose to go over this information again, but there are two fundamental points we would like to emphasize.
The first point is that the capital cost and investment risk associated with satisfying generation requirements can be accommodated with no capital investment risk to the public and no requirement for provincial guarantees to support the arrangements.
The second involves the understanding that many people have about economies of scale and the notion that bigger is better. With significant advances in gas turbine technology and the achievement of efficiencies never before contemplated in electrical generation, it no longer is necessary or reasonable to add large generation projects to the system to produce low-cost power. Building plants in the 100-megawatt to 300-megawatt size range allow one to capture economic efficiencies while controlling the investment required and optimizing the locations of these plants to maximize the benefits to the electrical system, and significantly shortening the lead time necessary to build operating generation. The bottom line is that we can produce power at rates that are 20% to 30% lower than the cost municipal utilities and large industrials currently pay Ontario Hydro, with no capital risk to the government.
There are opportunities today to develop supply alternatives to meet Hydro's future needs. In the short term, we have the ability to increase the output of our existing plants by upgrading the gas turbines to increase their output and by potentially expanding plants to increase their capacity. Our Windsor plant was built for an expansion which could be completed in less than 12 months.
For some time now we've been working with large industries and municipal electric utilities towards looking at the feasibility of several inside-the-fence projects. These are generation projects designed primarily to provide energy to specific industrial customers. With the cooperation of the municipal utilities, these projects could be developed to supply economic surplus power directly to the municipal utilities to reduce their supply costs without the government of Ontario incurring any resulting debt obligations.
I think it is fair to say that industry and a number of municipal utilities are very interested in this type of scenario but have in the past been challenged by Ontario Hydro over their right to purchase from anyone else. We believe that if Ontario Hydro were to withdraw its opposition to this type of project, several projects amounting to between 500 megawatts and 1,000 megawatts could be brought into service within as little as 30 months.
TransAlta is prepared to enter into arrangements whereby we would supply industrial customers, municipal utilities or Ontario Hydro under relatively short-term contracts that would expire the day a truly competitive market exists in Ontario. At that time, the plants would become what are known as merchant plants and we would take on the risks associated with selling into a competitive market. The reason is simple: We would invest only in those projects that would not only be cheaper than current utility costs but would stand the test of our predictions of a competitive Ontario market.
We also believe there are opportunities for private investors such as ourselves to enter into joint ventures with Ontario Hydro to maximize the efficiency of some of Hydro's existing generation and optimum site locations. This could take non-functioning sites or uneconomic plants that have not produced significant amounts of electricity for several years and produce a profitable, competitive asset without adding to the financial woes of Hydro or debt burden of the province. It will provide concrete environmental benefits compared to the current technology used to generate in those plants.
One of the cornerstones of any recovery plan implemented is that it should be compatible with the ultimate introduction of a competitive marketplace. Our proposal is to open up a portion of the Ontario market to competition as quickly as possible. The competitive component of the market could be sized to match the size of any anticipated reductions in output from the nuclear plants. The competitive market segment could initially include a defined class of customers; for example, industrial customers with an existing load above a defined threshold. Customers within this segment would be given a choice of procuring their supply competitively or remaining at their current supply costs from Ontario Hydro. One significant condition to this proposal would be that restrictions would have to be placed on Hydro such that it could not compete until the playing field has truly been levelled. In our view, the most expedient way to deal with this issue in the short term would be to allow the customers to make a choice and limit Hydro's participation in this defined market.
In closing, we would like to reinforce our points to the committee that there are real alternatives to Hydro supply as part of the recovery plan. To further take a step back, for a pricetag considerably less than $8 billion, the private sector could supply over 4,500 megawatts of new competitive generation that could deliver low-cost power to Ontario by the year 2000.
We would like to extend an invitation to the committee to visit our 110-megawatt gas-fired cogeneration plant in Mississauga, and we would like to thank the committee for allowing us to express our views. We would be pleased to answer any questions you may have.
The Chair: Thank you very much, Mr Chuddy. I appreciate that. I have a couple of questions before we go to the caucus questioning.
On page 8, the last line, you indicate "a pricetag considerably less than $8 billion." (a) Can you identify the pricetag, and (b) are you assuming that that pricetag would be picked up by the taxpayer or the ratepayer?
Mr Chuddy: For a pricetag in the neighbourhood of about $4 billion to $4.5 billion, that amount of generation could be built by the private sector. And no, the pricetag would not have to be picked up by the government. Our concept would be that the private sector would invest that money on the strength of likely some short-term supply arrangements that would expire when the competitive market comes into play.
The Chair: And would that be translated into the rates?
Mr Chuddy: The rates we would be charging for power would allow us to recover both operating costs and capital.
The Chair: Have you a sense of what that rate would take you into?
Mr Chuddy: The rate that we expect would come out of projects would be between 20% and 30% less than the existing municipal utility rates, which would put that power cost in the range of four cents a kilowatt-hour.
The Chair: Is that to the market or your cost?
Mr Chuddy: That's to the market.
The Chair: On page 7, towards the end of the initial but lengthy paragraph, the phrase appears "truly competitive market." Can you define that for me?
Mr Chuddy: It's a market where competition sets the prices. There's no artificial regulation setting those prices.
The Chair: I really do understand that, but the way you've written this, it is written "that would expire the day a truly competitive market exists in Ontario." How do I determine that suddenly the curtain has gone up and this is now the magic moment? Can you elaborate a little bit more on that?
Mr Chuddy: The kinds of events we were contemplating would be the type of events that would likely come as part of the implementation of the long-awaited white paper. What we would envision would be the regulatory revisions that would create a level playing field between the private sector and Ontario Hydro. Our definition of a competitive market is one where a level playing field exists such that no one party has any undue or unfair advantage over the other.
The Chair: So in your mind that would be a day when some kind of legislative starting pistol is fired to say, "As of that moment, this is now the field."
Mr Chuddy: Exactly.
The Chair: I think that's it. We'll now start the questioning. We have four minutes for each caucus, and it begins with the government caucus.
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Mrs Johns: In this documentation you talk a lot about supplying to industrial customers and to municipal electric utilities. It is of course the concern of everyone at this table that the residential ratepayer doesn't get stuck with the burden of this and in effect get a rate increase at the same time or consistent with that of the industrial user. What can you tell me about that in how you worded your document? Tell me what you were thinking about with the poor little residential guy who has a house.
Mr Chuddy: Our concept was that the types of projects we're thinking of would be effectively anchored by a long-term arrangement with an industrial customer, creating the opportunity for some power that's surplus to that industrial customer's needs to be supplied either to the municipal utility or to Ontario Hydro.
The surplus power cost characteristics would put those prices in the neighbourhood of 20% to 30% less than the cost the municipal utilities currently pay, thereby creating the opportunity for them to effectively reduce their average rates to all their customer classes.
Mrs Johns: The stranded debt that's available in Hydro, and if someone is getting their hydro from some place outside Ontario Hydro -- how would you see that being allocated through all the people of Ontario, or would you?
Mr Chuddy: To be frank, I'm not qualified to answer the question of how the stranded assets should be calculated or disbursed. There are many different models and many different ways it's done in different markets, and it really would be inappropriate for me to answer.
Mrs Fisher: At the beginning of your report it talks about almost a two-thirds predominance in the Alberta market. Something that hasn't been said at this table before but does worry me is that as we go through this, you can see that where there is a predominant source it always causes a risk. I don't know if that's the case in Alberta with gas only, but I do recognize the need for a blend. It worries me that somebody, like nuclear in Ontario at 66%, has the same predominance in another province.
I want to ask if you've heard of the Bruce Energy Centre.
Mr Chuddy: Yes.
Mrs Fisher: Some of the proponents at the hearings last week are thinking of a scenario like this: If gas was fed to the Bruce Energy Centre, in all probability it would not only protect the 400 jobs there today but allow for the expansion they've so dearly wanted for so long. Can you see a scenario where TransAlta or any other major company would be interested in looking at that scenario, where the excess generation would then be sold to Ontario Hydro, as it has in the past, but usually at lower levels? But to give the boost to the community, where Hydro's not the only predominant source, could you see that working?
Mr Chuddy: Yes, very much so. In fact, one of the concepts we would certainly endorse would be one where there was an opportunity to joint-venture with Hydro to refurbish or repower existing sites using more acceptable, more competitive forms of generation.
Mrs Fisher: So you can see it as a public-private opportunity.
Mr Chuddy: Absolutely.
Mr Kwinter: I just want to pick up on something Ms Johns talked to you about. You talk about your inside-the-fence projects. When we talk about the stranded debt -- and that is the inability of Hydro to service that debt if their revenues are cut off because of competition -- one of the suggestions, probably the most common suggestion I've heard so far, is that the way you deal with that is with some kind of charge on the distribution rates, the transmission rates. If you've got an inside-the-fence project, there will be no transmission using the grid; it's going to be a direct application from the energy producer to the user. Have you given any thought to how that would work?
Mr Chuddy: It differs with the industrial site. In some applications, the industrial customer simply couldn't afford to run independent of the grid. Therefore, to the extent that they would have to take services from the grid, that should be a service that would have to be paid for as part of the project.
There are very few industrial customers that could actually put a project in place that will allow them to be completely independent of the grid. The reason is that the characteristics of the types of projects we're talking about are that there are times when the project has to be shut down for regular service or maintenance, or occasionally where there is an unplanned outage. A number of industrial customers simply can't afford to lose their power supply during those periods. Therefore, they would take standby power from the grid, and for that reason it is very site-specific to the industrial customer.
Mr Kwinter: What do you think their reaction would be if it was mandated that they paid for their share of the grid regardless of whether they are using it or not, but just on the amount of energy they consumed?
Mr Chuddy: I think you'd have to ask the specific industrial customer, to be frank. I guess one vision we have is that as long as the stranded asset is applied equally to all generation in the province, for example, then you effectively raise the bar so that you still have a competitive market, albeit at a higher level.
Mr Kwinter: That's what I presume. One other question that's interesting -- I asked this question of an earlier deputant today -- is the whole idea of merchant plants. I'm paraphrasing, but they said in effect that there isn't such a thing as a merchant plant, that that's a misnomer, that nobody is going to build a plant on speculation because they won't get it financed; it's going to be too heavy a burden for them. The only way they could possibly do it is to have contracts in place and regulations in place that would satisfy the lenders that there is a steady income stream that would service whatever capital expenditure this plant would entail. Do you have a reaction to that?
Mr Chuddy: I think there are truly merchant plants. The issue is the degree to which they want to mitigate the risks of selling into a truly open environment. We are currently developing projects in Alberta that are predicated on selling power into a spot market, and what we're doing to mitigate that risk is we're putting in place contracts for differences with industrial customers and other agreements to help mitigate the risk of that merchant exposure. But to say they can't be financed, to say you can't get gas for them I don't think is accurate, in that it depends on how you configure the project, how you mitigate the risks. We are going forward on projects that will be financed and will have a significant amount of merchant exposure.
Mr Laughren: Four cents an hour? The reason I ask that is that Ontario Hydro has told us they can rehabilitate, for example, Pickering A and bring us power at 2.5 cents a kilowatt-hour. I'm wondering to what extent the ratepayers in Ontario should be embracing TransAlta at four cents when they could be embracing Ontario Hydro at 2.5.
Mr Chuddy: Our recommendation would be if you could buy power at 2.5 cents a kilowatt-hour, if that were the true, all-in cost, you should sign up for as much as you can buy.
Mr Laughren: When you compute your four cents, what portion of that is your share of the cumulative debt of Ontario Hydro?
Mr Chuddy: No share. We haven't included any stranded asset cost component in our analysis, simply because we don't have the numbers to support what that component should be.
Mr Laughren: Do you think that's fair?
Mr Chuddy: It's inappropriate for us to comment on how the stranded assets be divvied up among the province, be it on generation, distribution or transmission. I'm not qualified to answer your question.
Mr Laughren: Not qualified to answer with specific numbers, but you are qualified to indicate whether you think it would be fair that you would assume some of that cost.
Mr Hodgkinson: Certainly I think that's right. All generation, we believe, will have to assume some sort of levy for the stranded assets. What Mr Chuddy has talked about is just what we believe is the reasonable production cost, base price. If there is a levy of one cent or whatever it is per kilowatt-hour, if everyone is paying that and being treated equally, we think that would be perfectly fair.
Mr Laughren: Because Hydro is already paying that, right? Hydro is already charging that as part of the rates that ratepayers pay to Hydro, so it would seem to me that if the private sector wants in, they had better be prepared to assume a fair share of that. Is that fair?
Mr Hodgkinson: I'd have no difficulty with that. I would comment, though, that what Ontario Hydro is paying is taking care of the debt, presumably over a much longer period of time than under most of the proposals we've heard.
Mr Laughren: Absolutely. As a matter of fact, Hydro has said that part of the new charges of $8 billion or whatever for rehabilitation will be moved forward on to my grandchildren and your grandchildren. That's what they've already said.
On page 7 you say, "TransAlta is prepared to enter into arrangements whereby we would supply industrial customers, municipal utilities or Ontario Hydro under relatively short-term contracts that would expire the day a truly competitive market exists in Ontario." What do you mean by short-term? That implies, I gather -- and don't let me put words in your mouth -- that Bruce A and Pickering A would not reopen.
Mr Chuddy: Our view of what short-term agreement is probably something in the range of five to 10 years. That would be considered in our industry a relatively short-term agreement. The specific situation that would require an entity to contract for that would be governed by the risks of requirements for capacity in the future, be it some nuclear capacity not coming back, be it risks of availability of the existing fossil. There could be a number of reasons, but any one of those reasons could dictate why an entity would be interested in entering into an agreement of that nature.
Mr Laughren: I appreciate that. What bothers me is that if Hydro says, "We still intend to reopen Bruce A and Pickering A," what kind of short-term contracts are you going to be able to enter into if it's a period of three years? It wouldn't be four cents, would it?
Mr Chuddy: The difficulty would be that if there was no need for the power, obviously the contracts wouldn't be entered into.
Mr Laughren: Beyond that.
Mr Chuddy: It would be beyond that, after that period of time.
The Chair: Thank you very much. We appreciate your attendance upon the committee and we appreciate your written deputation. If there are any further questions, I know the committee will be in touch with you. We appreciate your assistance.
That will conclude the public portion of the committee's meetings today. We will be going in camera for a business session. Before we do, I remind members that the public meeting on Wednesday evening is at St George's Anglican Church, 51 Centre Street in Oshawa, Ontario. Then we'll be back here.
Clerk of the Committee (Ms Donna Bryce): That's the afternoon.
The Chair: What time is it starting?
Clerk of the Committee: The hearings will start about 2:30.
The Chair: Hearings start about 2:30 on Wednesday, and then we'll bring you back here to get you in your jammies.
Mr Galt: On a point of privilege, Mr Chair: I understand that a few of the visitors to the Bruce A plant received rather severe injuries to their feet as a result of some new safety shoes that were being worn. I'm wondering if some different arrangement could be made at Pickering and/or Darlington. If not, we may have a lot of people limping along or looking for another kind of transportation. Several are wearing Band-Aids as a result of the safety shoes from Bruce A.
The Chair: It is a point of privilege. Madam Clerk, he hurt his feet.
Mr Galt: I'm not the only one.
The Chair: If he wants to be a weenie, that's okay. We'll do what we can. I appreciate the point, and I shouldn't make light of that. I know sometimes the shoes can hurt. I bear a number of blisters on my feet, but I bear them gladly for the opportunity to be able to visit and to see the sites. I know an attempt will be made to find more accommodating shoes for you. We'll see what we can do.
Mr Galt: If you have your own, would you be allowed to wear them?
The Chair: Unless they're steel safety shoes --
Mr Galt: Yes, safety shoes.
The Chair: Then they go through the proper testing by Ontario Hydro.
Mr O'Toole: No, the testing is done by AECB.
The Chair: It may be AECB that has to do the testing, I don't know. We're not sure who would be the regulatory body to go to with safety shoes.
Mr Galt: Maybe at least we could have a choice, Mr Chair, could try two or three pairs on to find that they might rub in a new spot.
The Chair: I'd prefer that you do that on your own time and not on the public time. We'll worry about that one later, but it's a point well raised.
Mr Galt: Thank you for considering my point of privilege.
The Chair: I do take that as a point of privilege and I am ruling that we'll leave it in the hands of Ontario Hydro. I'm sure they will do what is right for you.
There's no further public business. This committee will now adjourn the public session and we will go in camera for private business for the next several hours.
The committee continued in closed session at 1934.