Canada to Shutter Older Coal Plants

While the U.S. awaits congressional action on a cap-and-trade program that could possibly be limited to just the utility sector, Canada is moving, starting in 2011, to phase out older coal power plants and replace them with natural gas–fired plants. The announcement, made this June by Environment Minister Jim Prentice prior to the G8 and G20 summits, could have serious implications for coal-fired generators in the country.

Under Ottawa’s proposal, utilities would be forced to shutter coal-fired facilities approaching the end of their 45-year life spans, or the end of their power-purchase agreement, if that were later. The so-called “cap and close” regulation would prohibit companies from making investments to extend the lives of those plants unless greenhouse gas (GHG) emission levels could be reduced to those of natural gas combined-cycle plants. The regulation would be “clear,” Prentice said. Plants would have to meet the new standards or close down. “No trading, no offsets, no credits,” he said.

The federal government’s announcement follows a pledge by the province of Ontario to close all four of its remaining coal-fired thermal stations—Atikokan, Lambton, Nanticoke, and Thunder Bay—by Dec. 31, 2014. Nanticoke (Figure 5) has repeatedly been scheduled for closure by Ontario Power Generation (OPG). The plant was originally scheduled to be closed in 2009, but that plan was dropped in 2006 when OPG was unable to develop replacement power sources. Nanticoke is exploring converting the plant to combust biomass (see “OPG Charts Move from Coal to Biomass,” POWER, April 2010).

5. Familiarity breeds contempt. The 3,640-MW Nanticoke Generating Station on the north shore of Lake Erie, Ontario, is the largest coal-fired power plant in North America. Since its completion in 1978, at a cost of nearly C$800 million, more than C$900 million has been spent on energy efficiency, reliability, and environmental improvements at the plant’s eight units. The plant is now scheduled to phase out its use of coal by 2014, and switch to biomass, as part of a larger measure by the provincial government. Canada’s federal government recently said it would phase out all the country’s older coal plants, a measure that could affect 33 of the nation’s 51 coal-fired facilities. Courtesy: Ontario Power Generation

Canada’s plan will affect all of its 51 coal-fired power plants, which produce nearly 19% of its power and 13% of its greenhouse gas emissions. Of those plants, 33 are expected to reach the end of their life spans by 2025, the government suggests.

According to Prentice, the measure would help the country move to a more “sustainable energy supply,” possibly even propelling it “to reaching its goal of being a clean-energy superpower” by creating stronger incentives for the industry to invest in cleaner technologies. Replacing coal power with natural gas–fired generation could also ultimately help the country meet its Copenhagen pledge to reduce its greenhouse gas emissions by 17% of 2005 levels by 2020, he reasoned.

But, as TransAlta Corp., the country’s largest operator of coal-fired plants pointed out, a lot of work will be required to ensure the proposal is effective and fair to consumers and investors. That company’s CEO, Steve Snyder, said the government would need to deal fairly with the accelerated capital stock turnover and operating transition costs associated with the “radical change of course for Canada’s power generation industry.” Setting out a list of issues the proposal would have to overcome in a recent Financial Post op-ed, he also suggested that long-term emission requirements would need to apply to natural gas facilities. “Without these standards, private capital cannot make the necessary investments to renew the generation mix for fear that 10 years down the road the standards will be changed and the economics of their investments will be severely impaired,” he said.

And because the regulation focuses only on coal without providing a “broader marketplace mechanism for pricing carbon,” as Snyder pointed out, it could adversely affect investment decisions concerning carbon-abating technologies. In particular, it could have implications for the country’s trailblazing carbon capture and storage (CCS) efforts.

Canada has several significant CCS projects in the pipeline, including TransAlta’s Project Pioneer in Alberta. That federally backed project entails construction of a large-scale facility to remove 1 million metric tons of carbon dioxide from a supercritical facility (that is under construction and scheduled to be commissioned in 2011) by 2015. The future of that and other projects would not be in jeopardy, Prentice insisted. The government would continue to foster CCS know-how, he said, adding that that new coal-fired plants that incorporate CCS technology would be exempt from the standard until 2025.