Promoting Green Power in Canada - Centre for Human Settlements

Promoting Green Power in Canada Pollution Probesurcharge, load balancing, or utility rate-ofreturnis taken into account here, and can beexpected to require an extra 2–4¢/kWh[CARE 2002b].Incentives Needed for ChangeFor the following cost comparisons, it isassumed that renewable power competeswith new fossil power plants. The reasoningis that renewable power would have to bemade cheap enough to be more attractive forpower retailers to buy electricity from thesefacilities than to build new fossil-fuel basedplants. A safe assumption is that the defaultpower price to be considered is the one forcombined cycle gas power plants, which hasbeen the technology of choice in Canada’spolitical and economic environment 32 [CEA2002].For Ontario, this would correspond to aprice of 5.0¢/kWh [CNFAQ 2002]. In orderto get an idea of how natural gas pricesinfluence the price of natural gas-basedgeneration throughout Canada, the costs canbe split into a) capital, operating andmaintenance cost, and b) fuel cost. Theformer can be assumed to be about 18–20$/MWh for a combined cycle plant [ATCO2002]. The fuel component for combinedcycle plants can be calculated based on anassumed 7.3 GJ of natural gas per MWhgenerated [ibid.]. The final generation pricedepends on the highly volatile natural gasmarket: natural gas prices over the past yearshave fluctuated between $3 and $14/GJ, andare currently at prices given in Table 4.15.The above example of 5¢/kWh for Ontariowould assume a natural gas price of about$4.25/GJ. Based on the data in Table 4.15,recent natural gas prices moved between $3and $5.6 on Canadian markets, with a slightprice disadvantage in Ontario vs. BC andAlberta. If it is assumed that the natural gasprice in Western Canada is $1 below that inEastern Canada due to the longer transportdistance to the East, this would result in anelectricity price of 4.37¢/kWh there. With aprice of $14/GJ, the Canadian price per kWhfor electricity generated from natural gaswould have been more than 12¢/kWh, farmore than most renewable resources. USnatural gas demand is projected to grow by27% from 2000 to 2010 [NASEO 2002],meaning that the natural gas price may wellreach 5–6¢/kWh, which would bring it intothe same range as many Canadian renewableenergy resources. Figure 4.16 shows in USdollars how gas power plants compare torenewable resources, depending on naturalgas prices. Fossil fuel prices are expected torise. Figure 4.17 shows that renewable powerprices, on the contrary, have fallencontinuously over the past few years. Thesefigures are in US dollars, and 2002 priceshave been found to be even lower in Canadathan those given here (see section 4.8.3.2).Much of Canadian potential renewablegeneration capacity could work economicallyin a range of 5–7¢/kWh. Figure 4.18 showsestimated generation prices of Canadianrenewables and the return to renewableelectricity generators that different incentiveswould generate, together with the defaultTable 4.15 — 2002 Canadian Natural Gas Prices ($Cdn/GJ) [WM 2002]12/06 05/06 29/05 22/05 15/05Alberta, Empress Spot 3.411 3.450 3.671 3.934 4.447Alberta, AECO-C Storage Facility 3.293 2.215 3.529 3.789 4.291BC Huntingdon Spot Export 3.236 3.320 3.286 3.754 4.483Toronto, City Gate 3.126 3.226 5.010 5.319 5.599106