McGuinty Government Gives Green Light To Two New Gas Plants

Archived Release

McGuinty Government Gives Green Light To Two New Gas Plants

Ministry of Energy

Projects Will Supply 560 Megawatts Of Reliable, Efficient Power QUEEN'S PARK, May 30 - The McGuinty government is reducing Ontario's reliance on coal-fired generation and boosting reliability by giving the green light to two gas-fired generation facilities in the Greater Toronto Area (GTA). "These new plants will help to ensure a reliable supply of electricity especially in the western GTA as we move forward responsibly to clean up the air we breathe and replace coal-fired generation," Energy Minister Dwight Duncan said. The two projects are in addition to the four projects announced on April 13 as part of the government's Request for Proposals (RFP) to bring on-line 2,500 megawatts of new generation capacity and demand-side projects. Combined, the announced projects will provide enough power for over 850,000 homes and represent a total capital investment of about $1.5 billion in Ontario. The final two successful proposals, both submitted by affiliates of Eastern Power, are: - Greenfield North Power Project, 280 megawatts, Mississauga (Hurontario Street, north of Derry Road) - Greenfield South Power Project, 280 megawatts, Mississauga (Loreland Avenue, south of Mattawa Avenue) The contract structure shifts construction and operational efficiency risks to the successful proponents, ensuring that they will only be paid if they meet stringent performance terms. Using natural gas prices and market conditions over the past two years as an example, the average price of power from the projects would be less than 7.8 cents per kilowatt hour with the plants operating approximately 45 per cent of the time. According to NERA Economic Consulting, the ministry's technical advisor, this is comparable to the most highly efficient gas-fired generation facilities in North America. "In the past, all of the risks of building and operating new generating facilities in Ontario were ultimately borne by either ratepayers or taxpayers," Duncan added. "I am delighted with the value-for-money that Ontario ratepayers will realize as a result of this highly-competitive tendering process." The RFP process was overseen by an independent fairness commissioner to ensure it was conducted in a fair and transparent manner. The commissioner's full report is available online at www.energy.gov.on.ca. Both generation projects are now subject to required environmental assessment and local planning processes. The contracts are being administered through the new Ontario Power Authority (OPA), which will monitor progress on the projects. Disponible en français. www.energy.gov.on.ca Backgrounder ------------------------------------------------------------------------- CONTRACT STRUCTURE AND PRICING QUEEN'S PARK - The McGuinty government today gave the green light to two 280-megawatt gas-fired facilities in Mississauga. The two projects are in addition to four projects announced on April 13 as part of the government's Request for Proposals (RFP) to bring on-line 2,500 megawatts of new generation capacity and demand-side projects. The six projects include five generation stations and one demand response program. They will provide enough power for about 850,000 homes and represent a total capital investment of about $1.5 billion in Ontario. The successful proponents are: - Greenfield Energy Centre (a partnership between Calpine and Mitsui), 1,005 megawatts, Sarnia-Lambton - St. Clair Power (a partnership between Invenergy and Stark Investments), 570 megawatts, Sarnia-Lambton - Greenfield North Power Project, 280 megawatts, Mississauga (Hurontario Street, north of Derry Road) - Greenfield South Power Project, 280 megawatts, Mississauga (Loreland Avenue, south of Mattawa Avenue) - Greater Toronto Airports Authority, 90 megawatts, Mississauga - Loblaw Properties, 10 megawatts, province-wide demand response initiative. Under the terms of the contract, all construction, operational, performance and efficiency risks will rest with the contract winners, ensuring that the winners will only be paid if they meet the stringent performance terms. The contract structure is based on a contingent support payment, with all new generation priced through Ontario's competitive electricity market. The contract winners are assured that they will have sufficient ongoing revenue to meet their fixed project costs, such as capital and financing, if they operate efficiently according to the pre-agreed standards. When market revenues exceed these fixed-cost requirements, the contracts stipulate that 95 per cent of the surplus will flow back to ratepayers. The proponents that submitted proposals under this RFP each bid a "Net Revenue Requirement" (NRR), which includes all fixed project costs. The weighted average NRR that was bid by the six selected proponents is about $7,900 per megawatt-month. This is the average amount required on a per-megawatt basis to cover the monthly fixed costs of these projects. For the five selected generation projects, this roughly translates to average capital costs of about $800 per kilowatt. For evaluation purposes only, as outlined in this RFP, the NRR of each project was adjusted to compare the relative costs of generation proposals to those of demand response projects. This adjusted NRR is referred to as the "Real Indexed Net Revenue Requirement" (RINRR). The RINRR for the six selected projects was about $6,910 per megawatt-month (expressed in 2007 dollars) on a weighted average basis. The actual cost of power from the five generation facilities will vary with the price of natural gas, which fluctuates from season to season and year to year. However, using historical market data from the last two years as an example, the average price of power from the five generation projects would have been less than 7.8 cents per kilowatt-hour. According to NERA Economic Consulting, the ministry's technical advisor, this is comparable to the most highly efficient gas-fired generation facilities currently operating in North America. Disponible en français. www.energy.gov.on.ca www.ontarioconserves.gov.on.caFor further information: Contact: Angie Robson, Minister's Office, (416) 327-6747; Ted Gruetzner, Communications Branch, (416) 327-4334